Sustainability · Sustainability path 1. Energy and Materials 1.1 Balancing languages of light and...

Sustainability

sustainability report

2019

Index

A Message To Our Stakeholders

Sustainability Highlights 2019

Flos World

Group structure and global presence

Value Creation

Product development

Suppliers selection and management

Client Relationship

Sustainability path

1. Energy and Materials

1.1 Balancing languages of light and environmental challenges

1.2 Monitoring and optimising resource consumptions

1.2.1 Materials and waste

1.2.2 Energy and GHG emissions

2. Development and wellbeing

2.1 Employees as the essence of brand success

2.2 Training for personal and professional improvement

2.3 An inclusive and safe working environment

3. Heritage and know-how

3.1 Promoting the art and design culture

3.2 Fostering design know-how

6

20

23

26

42

43

49

52

58

60

62

70

72

77

82

84

87

90

94

96

102

Reporting Principles And Criteria

Scope Of Reporting

Materiality analysis

Key stakeholders

Quality Reporting Principles

Calculation Methodologies

GRI Content Index

106

107

107

111

111

112

114

6

Sustainabil i ty Report 2019

A Message To Our Stakeholders

7

I am proud to present our renewed Sustainability Report that mirrors Flos’ renovated com-

mitment to sustainability, reaching deep down inside the Group’s strategic approach – a fil-

rouge that ties together all our activities. The Sustainability Policy and its pillars, published on

our corporate website, are a clear expression of this profound commitment and of the deep

engagement of all Flos people. This goes hand in hand with our adherence to the UN Global

Compact principles and our support to the broader Sustainable Development Goals.

As my first year as Flos’ CEO, I wanted to pour all of my experience and devotion to sustain-

ability matters from the outset, in order to contribute to deepen an established mindset that

makes the Group stand out. For this reason, a change management effort has been inaugu-

rated with the aim to tighten the collaboration both between functions and Group companies:

along the whole value chain, shoulder-to-shoulder work has been put at the core of Flos’ daily

life, enabling to liberate breakthrough creativity, confidence and performance in the activities

carried out at all levels – in one word, unfolding the Company's full potential.

Talent, and thus the people, are the pivotal enabler of this potential and, as a result, they rep-

resented Flos’ focus since the beginning, both inside and outside the Group’s perimeter. This

relationship has been the guiding principle of the Group’s way of dealing with the Coronavirus

pandemic, which broke out at the beginning of 2020: in moments of serious emergency that

threatened our entire societies from the very foundations, Flos took advantage of its flexibility,

market position and proactivity, standing still without compromising on the safety of its people.

Our wide-ranging sustainability approach embraces environmental aspects as well: in 2019, we

dedicated much of our efforts to continue increasing efficiency of operations, with regards to

both energy consumption and materials. As for the former, we increased the share of electricity

supplied by guaranteed renewable sources, thus further reducing our impact; as for the latter,

our R&D department dedicated its time to exploring new solutions that will potentially change

the way we conceive and craft new, breakthrough products from the ground up.

Finally, one of Flos’ most valuable ingredients is tightly related to its heritage and know-how.

The intangible resources the Group can count on are essential to create positive synergies,

that is to create value not only from a cost saving perspective. The goal of increasing business

resilience and vitality is inextricably tied to talent and culture. To this extent, Design Holding is

an important sharing platform that plays a central role in creating value through both financial

and social capital.

Knowing that we still have a long and challenging path ahead, this Report reveals how we are

passionately striving to consolidate our sustainability mindset. I thus hope you will enjoy the

reading.

Roberta Silva, CEO

8


Electronic department

Our Stakeholders

9

R&D department

10


Outdoor production department

Our Stakeholders

11

Waterproof test

12


Painting department

Our Stakeholders

13

Polishing

14


Logistic department

Our Stakeholders

15

Custom product department

16


Microcomponents automatic warehouse

Report ing Pr inciples and Cri ter ia

17

LED assembly department

18


Finance department

Report ing Pr inciples and Cri ter ia

19

Quality control department

20


Sustainability Highlights 2019

21

Susta inab i l i t y H igh l ights

Tons of CO2Environment Reduction of electricity

698 13 %GHG emissions

compensated through

the subscription to Go

Green Program by DHL

consumption in the Bovezzo

plant compared to 2017

Revenues People

Local suppliers in Italy

Countries

Employees Flos, Ares,

Antares

Training hours per employees

414

Local suppliers in Spain

8.8 hPeople

232 M€ 651 119The Group

87 % 67 %Value Chain

Permanent

contracts

Increase of training hours

per employee with respect to 2015

95 % 42 %

22


Arco by Achille Castiglioni

Flos World

23

Flos World

Since it was founded in 1962, Flos (“flower” in Latin) has been an industry leader, a standout company creating revolutionary, category-defining products that enhance any building or setting. From the outset, Flos has immediately gained – and maintained – a reputation for masterfully manufacturing poetic designs and forward-thinking inventions. Counting on solid foundations that are directly drawn from its renowned legacy, for nearly sixty years Flos has pushed the boundaries by making timeless icons that link design and engineering with art and culture to profound effect.

24


“In Flos you can’t find a uniform design model,

but rather a strong desire to make design that can

express broader meanings of the ‘sense of our

time’, meanings that are often capable of adding

cultural values even to expressions of taste.”

(Achille Castiglioni)

Today, Flos Group is still recognized as an

international organization and a world leading

manufacturer of innovative lighting solutions in

the residential, outdoor and architectural sectors,

featuring high quality products and systems merging

technology and emotion. Organized into four divisions

- Flos Architectural, Flos Decorative, Flos Outdoor,

and Flos Bespoke - Flos incorporates a holistic,

human-centered philosophy of lighting design.

Flos World

25

Flos Shop

26


1 Average number of full-time equivalents (FTE) derived by taking into account employees employed under contracts of service, both permanent and temporary, in each month.2 The Graph shows geographical employee distribution by taking into account the Country to which the subsidiaries belong.

Group structure and global presence

Flos is one of the leading players in the Italian lighting industry, with consolidated revenues of more than €232

million in 2019. In 2019, on average, Flos employed 6511 people, mainly located in the three operating sites of

Flos S.p.A. in Italy, for the Decorative segment (headquartered in Bovezzo, Brescia); in Spain with its Antares

Iluminacion S.A.U. subsidiary for the Architectural and Soft architectural segment (Valencia); and, again in Italy,

with Ares s.r.l. (Bernareggio) for the Outdoor segment. The remaining people were employed in the Group’s

smaller commercial subsidiaries and the two custom product manufacturing subsidiaries, Flos Bespoke S.r.l.

(formerly Light Contract S.r.l., Collebeato, Brescia - Italy) and Flos USA Inc. (Lukas Lighting division, Long

Island City, NY-USA).

In December 2014, Investindustrial V L.P., one of Europe's leading independent investment groups, became

the majority indirect shareholder of Flos S.p.A. Starting from November 2018, Flos S.p.A. is fully controlled by

Design Holding S.p.a which is itself jointly (and indirectly) controlled by Investindustrial funds and the Car-

lyle Group. The new Design Holding Group, the largest global high-end design group with European heritage,

brings together three complementary companies with strong individual identities and significant design legacy:

B&B Italia Group in furniture, Louis Poulsen and Flos in lighting.

Flos Employs

651 people2

300 employees Italy

167 employeesSpain

110 employeesCommercial subsidiaries DenmarkFranceGermanyNorwayChinaSingaporeNetherlandsBelgiumJapan.

74 employeesUSA

Employee worldwide distribution

Flos World

27

B&B Italia B&B Italia is the leading Italian high-end furniture design brand, globally recognised for its iconic products and technological innovation. The Company has a unique product portfolio, marketed under the B&B Italia, MAXALTO and Azucena brands for furniture and Arclinea for high-end kitchens, and has been awarded many design prizes over the years. B&B Italia has developed longstanding partnerships with world-renowned designers and architects such as Antonio Citterio, Patricia Urquiola, Naoto Fukasawa, Gaetano Pesce and many others which have positioned the Company at the forefront of technological innovation and design. B&B Italia is headquartered in Como (Italy) and has 11 flagship stores worldwide (2 in Milan, 2 in Paris, London, Munich, Hamburg, Washington, Dallas and 2 in New Work) and over 40 monobrands. B&B Italia also signed commercial agreements in 80 Countries, developing a presence in over 800 specialized shops. The Company also operates in the Contract Division with complex "turnkey" realizations of furnishings and finishes in the hospitality, retail, office and nautical areas.

Louis Poulsen Louis Poulsen is a leading lighting brand with an iconic product portfolio focused on Danish design heritage, with headquarters in Copenhagen and production facilities in Vejen (Denmark), that offers a high-end product range for both indoor and outdoor applications. Louis Poulsen combines iconic designs stemming from the work of golden age Danish designers, such as Poul Henningsen, Arne Jacobsen, Finn Juhl and Verner Panton, and collaborations with leading modern designers such as Christian Flindt, Shoichi Uchiyama and Louise Campbell. The Company has a global distribution network with more than 50 countries served, and dedicated showrooms in Copenhagen, Stockholm, Miami, Helsinki, Vejen, Oslo, Los Angeles, Singapore, Tokyo and Düsseldorf.

The Design Holding Group

28


3 Value related to Community Investment excludes donations of lamps (e.g. donations to charity auctions)

The following table reports the economic impact that Flos' financial results

have on its stakeholders. Direct economic value generated by Flos shows a

proportional increase between 2017 and 2019. Finally, as for the payments

to the government, the significant increase is mainly related to non-recurring

costs recorded in 2018, connected to the extraordinary operation involving the

creation of Design Holding.

Direct Value Generated, Distributed and Retained€ in thousands

2017 2018 2019

Direct economic value generated 215,144 225,762 232,287

Direct economic value distributed 180,223 201,467 190,141

Operating costs 120,626 143,233 128,877

Employees' wages and benefits 37,687 39,212 42,146

Payments to providers of capital 12,322 13,791 8,866

Payment to government 9,506 5,127 10,173

Community Investment3 82 103 78

Economic Value Retained 34,920 24,295 42,146

Flos World

29

The Group Structure

Flos Benelux NV

Flos Scandinavia A/S

Flos Sverige AB

Flos Milano S.r.l.

Flos Japan Co. Ltd

Flos BV

Flos S.p.A.

Flos Roma S.r.l.

Flos UK ltd

Flos Norge AS

Flos France S.a.s

Flos GmbH

Flos Illumination Shanghai Ltd

Antares Iluminacion Pte Ptd

Euroformat S.r.l.

Flos USA Inc.

Antares Iluminacion S.A.U.

Flos Bespoke S.r.l.

Ares S.r.l.

Operating subsidiaries

Commercial branches

30


4 In 2019 a female component, Roberta Silva, in the role of CEO joined the Board. Age composition varied as well, with no member under 30 years of age (1 in 2018), 3 members over 50 years of age (none in 2018) and the rest in the middle age group.

An independent auditing firm has also been appointed.

To ensure transparency and responsible day-by-day operations, since 2015,

Flos has an Organizational, Management and Control Model pursuant

to Italian law 231/2001 (hereinafter "Model 231"), approved by the Board

of Directors in March 2016. The drafting of the Model 231 has included

the analysis of the main risks and the mapping of operating areas potentially

subject to those risks.

Board Member

Vitaliano Borromeo Arese Chairman of the Board

Roberta Silva CEO

Gabriele Del Torchio Vice president of the Board

Maurizio Bottinelli Board member

Francesco Malvezzi Board member

Massimiliano Caraffa Board member

Davide Ambrogio Pelle Board member

Flos S.p.A. has implemented a control and governance system based on:

• A Board of Directors, comprising seven members (4 in 2018)4, which,

together with the Design Holding Board of Directors, is entrusted with

the powers to ensure the ordinary and extraordinary management of the

Company;

• A Board of Statutory Auditors, comprising three standing statutory auditors

and two substitute statutory auditors

Flos World

31

As foreseen by Model 231 and applicable legislation, Flos has appointed

a Supervisory Body (Organismo di Vigilanza) entrusted with the task of

controlling internal implementation and corporate compliance with Model 231,

as well as updating process.

The Supervisory Board comprises two external members, fulfilling the

regulatory requirements in terms of autonomy, independence and continuity

and a secretary. Together with Model 231, Flos drafted its Code of Ethics,

which describes the Company's missions and ethical principles and governs

the relationship between Flos and all its counterparts, i.e. shareholders,

employees and partners, suppliers, Public Administration, trade unions,

political parties and clients.

The implementation of Model 231 and of the Code of Ethics, together with

Flos' certified 9001 Quality Management System, represents the framework

to ensure compliance with applicable national and international laws and

regulations.

Flos firmly believes that acting in accordance with the principles of Model

231 and of the Code of Ethics is essential to promote responsible business

conduct, i.e. enabling it to avoid the occurrence of corruption cases and of

unethical business practices. In this regard, in the 2017-2019 period, neither

complaints from competitors and public authorities for anti-competitive

behavior nor corruption cases were either identified or reported.

32


Manufacturing Plants

Lukas Lighting (Flos USA Inc.)New York, United States

Antares Iluminación S.A.U. Valencia, Spain

Flos S.p.A.Bovezzo (Brescia), Italy

Ares S.r.l. Bernareggio (MB), Italy

Flos Bespoke S.r.l. Collebeato (Brescia), Italy

Sales by Country

Middle East

5.0%

Africa

0.8%

Americas

15.8%

Eastern Europe

5.2%

Western Europe

62.0%

Asia Pacific

11.2%

Showrooms - Flagship Stores - Offices

Flos Norge AS Oslo, Norway

Flos Flagship Store Stockholm, Sweden

Flos Scandinavia A/S Copenaghen, Denmark

Flos BV Amsterdam, Netherlands

Flos France Store and Showroom Paris, France

Flos Flagship Store Lyon, France

Flos Flagship Store Roma, Italy

Flos Flagship Store & Showroom Milano, Italy

Flos USA Inc.New York, United States

Flos Co Ltd. Tokyo, Japan

Flos World

33

Flos' original core business, the Decorative collection merges technical

research and innovation with emotional and aesthetic design, thanks to the

strong relationships existing between the Company and the designers.

All products belonging to Flos' Decorative collection are designed and

developed in the Flos S.p.A. Italian headquarters in Bovezzo and include

several product categories, such as table lamps, floor lamps, pendant lamps

and wall & ceiling solutions.

Flos Decorative

Bulbo

34


Noctambule Floor and Suspension by Konstantin Grcic

Flos World

35

The Architectural collection includes indoor lighting systems both for

domestic/residential use as well as for professional use.

This business segment designs and develops lighting solutions, often in

cooperation with engineering and architectural firms, both for big retail

networks (mainly fashion retail and hospitality) and for private customers.

This business line focuses on professional and residential lighting systems,

custom-made solutions and soft architecture products and it is based in

Antares Iluminacion S.A.U.'s headquarter in Valencia, Spain.

Flos Architectural

Zero Track by Flos Architectural

36


Diversion by Piero Lissoni

Flos World

37

The Flos Outdoor collection has been created to illuminate open spaces

through a new design language, finding balance both by hiding in the natural

landscape behind discrete objects, and by conversing with the architecture

through designs with a unique identity.

At present, Flos Outdoor collection is mainly produced by Ares (Bernareggio,

Italy).

Flos Outdoor

Flos Outdoor collection

38


Flos Outdoor collection

Flos World

39

Born to satisfy customers' specific practical needs and their increasing desire

for exclusivity, this collection focuses on the custom-made segment.

The custom-made business segment has been developed for over 20 years

by Flos' Italian subsidiary, Flos Bespoke (formerly Light Contract), and it is

currently growing following the acquisition of Lukas Lighting, later merged into

Flos USA Inc., in December 2015.

Through this period of continuous change and development, the segment

is becoming particularly important for Flos, on the one hand to guarantee a

corporate identity and strong internal cohesion, and, on the other, to offer its

products through a unique brand and image.

Flos Custom

Hotel Augustus

40


Versace Boutique and Sanofi working space in New Jersey

Flos World

41

Conference Room XIX, United Nations

42


Value creation

Flos' intent of bringing to life inspiring sketches

and projects from lighting architects and designers

demands an articulated production process involving

the R&D department, highly-specialized artisans

and an accurate quality control system. Within this

process, Flos directly manages, in collaboration

with designers, architects and engineers, the

conception and design of lighting systems, as well

as the monitoring activities and tests carried out to

assess product quality and to ensure compliance

with safety requirements. Whereas, for the majority

of manufacturing, assembly and logistic activities,

Flos relies on the expertise of a specialized and

trusted network of suppliers. Finally, an integral

part of Flos value chain is customer care, directly

managed internally with a unique contact for both the

Decorative and the Architectural collections. The aim

is to build a strong relationship with every customer

and to respond effectively and promptly to each and

every customer need.

Flos World

43

Product Development The creation of products that become icons and the conception of new

languages around light are the result of an articulated process involving Flos'

internal R&D department, as well as renowned and emerging designers,

architects and engineers.

Painting process

44


Conception

Pre-Series Production

Designers, architects and/or engineers submit the lighting solution idea along

with some preliminary sketches to Flos’ R&D Department, and subject them

to top management evaluation before starting the production of the prototype

series.

Once the product has been accepted, the R&D team, in collaboration with

designers, architects and engineers, works for its realization. A pre-series

is carried out in order to test the mechanical and electrical design, to select

the most appropriate materials, to identify the best available suppliers, the

production process and to incorporate any necessary improvement to the

luminaires. During these phases, different assessments regarding construction,

mechanical and electrical aspects are carried out.

Flos World

45

If the prototypes simultaneously satisfy the pilot clients’ expectations (for

the design collection), Flos’ internal quality standards and the applicable

regulatory requirements, the product is approved for industrialization and the

production phase is launched.

Launch Of The Product

The pre-series is tested to assess its adherence to quality and compliance

requirements. Regarding the design collection, the final prototypes issued from

the pre-series production process are sent to pilot clients who are asked to fill

in a report about the product, giving Flos precious feedback covering product

functionality, finishes, packaging as well as the overall product emotion and

experience.

Quality And Compliance

46


The production chain of the Decorative collection

is handled in Flos' Italian headquarters in Bovezzo,

for the indoor lighting products, and in Bernareggio,

for the outdoor products, while the Architectural

collection is produced in Antares' Spanish

headquarter in Valencia.

The production process begins, once the products

have passed the prototype and pre-series phases,

with the purchasing of single components,

as the large extent of techniques and materials

required for Flos' products results in the outsourcing

of most of the manufacturing processes.

This phase involves highly specialized techniques,

including those necessary for the manufacturing

of hand blown glasses and technical fabrics,

but also coating processes and plastics and

metals processing.

Processed materials composing the lighting systems

are then sent to Flos headquarters

to ensure that they meet the high quality and

safety standards required by the Company and all

applicable regulations. Afterwards, the components

are assembled as indicated in the design and

engineering plans.

Flos World

47

The assembly process is predominantly outsourced to a network of selected

artisans, mainly based in the Lombardy region and in Valencia.

The production chain ends with a further quality assessment of the final

product, carried out in the Group's internal laboratories.

Over the last few years, production processes have been characterized

by an increase in Flos' production volumes resulting in a saturation

of the external network in charge of product assembly. In order to overcome

this issue and to continue responding to market needs, in 2018 Flos started

a pilot project for setting up a new assembly line in its facilities in Nave, close

to its Bovezzo plant. The project, consolidated in 2019, aims to increase the

ownership of the production process, thus enhancing the control over its

supply chain as well as the production capacity and flexibility.

To design and manage the new production area, Flos management decided to

implement the lean manufacturing principles. The lean thinking is a systematic

methodology that focuses on minimizing waste within manufacturing

processes while simultaneously maximizing productivity. The key components

and foundation is the so called "5 S program" which stands for: Sort, Set in

order, Shine, Standardize and Sustain. The 5 S program focuses on having

visual order, organization, cleanliness and standardization of each workspace,

resulting in improved profitability, efficiency, service and safety. The primary

objective of applying such principles for Flos is to obtain a production and

logistics flow organized in accordance with the most advanced manufacturing

concepts capable of eliminating faultiness as well as time and materials

inefficiencies. In 2019, the project was characterized by the introduction of

new production stations and by increased efficiency and quality outcomes as

a result of the continuous improvement mindset, the basis of lean thinking.

Flos, in line with its view of an integrated supply chain, is also starting

some collaborations with its key suppliers aiming at supporting them in the

integration of the lean principles in their production processes.

In 2019 Ares also carried forward the implementation of the lean principles in

its production processes. The lean project, in particular, has been focused on

the integration of painting activities and on the consolidation of existing KPIs

as well as the identification of new ones.

48


1. First quality check on raw materials and components coming from suppliers.

2. Statistical quality check on single components following the manufacturing/painting phases by suppliers.

3. Routine test quality check on final products. Carried out in the assembly department to ensure that all electrical items are checked to comply with safety regulations (including tests on the electrical safety of products detailed in the safety standards) and additional statistical tests.

Quality as a synonym of safety and durability

Beyond mere regulatory compliance, Flos’ attention to quality is inherent in

every phase of the production process. In addition, safety is continuously

monitored throughout the product lifetime through the analysis of complaints

and communications by consumers. In the rare event of complaints related

to safety, Flos has established procedures that allow for timely reaction by

reclaiming the products and conducting tests in order to ensure customer

safety. For instance, in relation to the malfunction case of the halogen version

of the Skygarden 1 and Skygarden 2 lamps and following few complaints

received regarding Romeo S2 Moon and Louis (manufactured until March

2006), Flos duly distributed safety kits and collaborated with the local

authorities of the countries involved. In 2019, no analogous complaints related

to safety aspects were recorded by Flos.

Furthermore, Flos is permitted to use the ENEC Mark logo on many of

its products. The ENEC logo is a voluntary mark which complements the

mandatory CE marking, being a seal of compliance to all applicable European

standards. While CE marking represents a self-declaration by the manufacturer

and does not imply that products are approved by the European Commission

or any other authority (i.e. Test Houses), the ENEC mark demonstrates

compliance with European standards and is granted by an independent third

party, which is responsible for inspecting the production process as well. The

ENEC mark can be granted only to Companies in which a Quality System is

operating, either certified or qualified by a third-party.

Finally, product labels include all the necessary information to ensure the

safe use of luminaires, in compliance with the minimum safety requirements

Flos World

49

specified in the Low Voltage Directive and other applicable EU Directives. The

products are also identified with a batch of production, according to which it is

possible to obtain access to the relevant routine test results and to a list of the

components used for their production. No incidents of non-compliance with

regulations and voluntary codes concerning products have occurred during

the last three years.

Flos' products are the outcome of a long-lasting collaboration with top-quality

Italian and Spanish suppliers, a fusion of craft heritage and experimentation.

Besides the electronic components, which are usually imported or purchased

from multinational companies, the production of other semi-processed

materials and components and the majority of the assembly activities are

outsourced to Italian and Spanish suppliers, mainly from northern Italy and

Valencia's surrounding areas. This proximity becomes crucial, also in strategic

terms, given the intensity and timeliness with which Flos conducts quality

control processes on semi-processed materials and on finished products.

Promoting local suppliers not only gives the opportunity to rely on a shorter

supply chain improving reliability and delivery times but also demonstrates

support for the local community. For both the Decorative and the Architectural

collections, the percentage of local suppliers is relevant both in terms of the

number of suppliers and in terms of spending, showing a regular trend through

the years, as reported in the following tables. Regarding the Decorative

collection, Flos' preference for local suppliers is not a simple choice of

convenience, but it stems from its attention and attachment to the concept

of "Made in Italy", considered as a synonym of expertise, artisanship and

innovation. Indeed, more than 87% of the Company's suppliers are located

in Italy, mainly in the Lombardy region (approximately 70% out of the total

number of suppliers, representing 63.4% of the total spent in 2019). In line

with previous years, 2019 also recorded an overall increase in the number

of suppliers, mainly related to the launch of new products and collections

characterized by distinctive materials, thus requiring highly specialized

suppliers.

Suppliers Selection and

management

50


5 Data includes Verona district. For the definition of "local suppliers" Verona district has been also considered, based on the proximity to Bovezzo HQ.

Suppliers Provenance U.M. 2017 spending 2018 spending 2019 spending

Italy suppliers (n.) 358 84.1% 425 82.4% 497 85.4%

Lombardy region5 suppliers (n.) 287 68.6% 341 69.1% 397 63.4%

Italy (except Lombardy region) suppliers (n.) 71 15.5% 84 13.3% 100 22.1%

Other Countries suppliers (n.) 49 15.9% 64 17.6% 71 14.6%

Total n. 407 100% 489 100% 568 100%

Concerning the Architectural collection, given the quality performance of

all suppliers, the selection process is primarily based on their flexibility and

capability to promptly react to Flos' requests, which adapt to the fluctuations

and demand shifts characterizing this branch of the lighting market. For

these reasons, as shown in the table below, more than 67% of the Company

suppliers are located in Spain and, more specifically, in Valencia and its

surrounding areas (approximately 42% of the total number of suppliers and

almost half of the total spent in 2019).

Suppliers' provenance by number and spending – Architectural collection

Suppliers Provenance U.M. 2017 spending 2018 spending 2019 spending

Spain suppliers (n.) 143 70.8% 137 70.9% 129 67.8%

Valencia and surrounding areas suppliers (n.) 81 51.4% 79 51.3% 81 49.6%

Other areas in Spain suppliers (n.) 62 19.4% 58 19.6% 48 18.2%

Other Countries suppliers (n.) 60 29.2% 67 29.1% 63 32.2%

Total n. 203 100% 204 100% 192 100%

The sustainable management of the supply chain involves a long-lasting

relationship between Flos and its suppliers, built on mutual trust and respect.

Considering the important role played by the supply chain in Flos' business,

the Company is committed to transfer its modus operandi and its expertise to

suppliers, providing technical support in order to guarantee product quality.

Flos adopts a strict selection process and conducts audits at the suppliers'

sites to evaluate the quality of the materials and services provided, their

technical skills and the tools and machineries used. Moreover, great attention

is paid to the supplier's quality management system (QMS), preferring those

Suppliers' provenance by number and spending – Decorative and Outdoor

collection

Flos World

51

who have obtained an ISO 9001 QMS certification. Flos' business model,

focused on aesthetics and on the functional durability of its products, implies

a greater attention devoted to quality and technical aspects during the

assessment and selection of suppliers. Nevertheless, in its attempts to monitor

and reduce its overall impacts along the supply chain, at the beginning of 2018

Flos released new contractual clauses, based on a series of relevant national

and international guidelines and regulations.

The latter cover issues such as, the safety of products and workplaces, the

environmental impact of products and production processes and workers'

labor conditions. Relevant examples of such norms are provided by the

REACH Regulation, focusing on the assessment and management of the risks

posed by chemical substances, the Waste Electrical & Electronic Equipment

Directive, for the management of electronic waste, or the International Labor

Organization's regulation, such as the Equal Remuneration Convention, which

fosters work of equal value for men and women. A further reference has been

introduced about Conflict Minerals Rules, as regulated by Section 1502 of the

Dodd-Frank Act and of Regulation EU 2017/821. Moreover, in order to track

their sustainability performance, these additional contractual clauses foresee

the possibility of requesting suppliers' specific data related to environmental

aspects (such as waste produced, raw materials and energy consumption)

or safety information (such as accident statistics). Similarly, these new

contractual clauses foresee the opportunity of conducting environmental

and social audits on suppliers' facilities and policies, in order to test their

compliance with Flos' requests. In 2018, in order to carry forward supplier

monitoring, Flos also introduced a new tool for supplier qualification.

In addition, in 2019 Ares completed the implementation of a new vendor rating

system that aims at strengthening the relationship with its suppliers, as well

as sustaining the supply chain. The new system allows Ares to have in-depth

monitoring of a set of KPIs, such as economic solidity, flexibility and quality: in

the future it might also turn into a rewarding mechanism.

Although designed for collecting business-related supplier information,

both Flos and Ares tools will also allow the introduction of ESG aspects in

supplier screening that, together with the new contractual clauses, will help

the Company to further understand and minimize social and environmental

burdens across its supply chain.

52


Client Relationship Flos demonstrates its attention to clients not only by offering exceptionally

designed and technologically advanced lighting systems, but also through a

close communication with them as well as an efficient repairing/substitution

service.

Flos's sales channels

FlosS.p.A.

Exporters

Agencies

Design Studios and Architectural Firms

Wholesalers RetailersKey

AccountsShowrooms

As for communication, Flos operates through various sales channels to better

adapt its offer to clients' different expectations and technical requirements.

The Group mainly relies on its own subsidiaries and sales team located

worldwide as well as on agencies, which are intermediaries that sell products

of the Architectural and Decorative collection to distributors. Flos' distributors

comprise wholesalers of electric equipment and lighting specialists,

which sell products to installers, and generalist retailers, that are mostly

composed of family-run furniture or lighting shops, which predominantly

serve final customers. Key accounts, instead, are B2B clients, which have

a direct contact with the Company also through the distribution network,

that represents an additional service and a market advantage compared to

competitors.

By doing so, Flos operates closely with the key accounts both to meet their

Flos World

53

need of having the same lighting concept applied to their different stores

and to help them better develop their project and business. Flos also relies

on Agencies that operate through active sales, by collaborating with design

studios and architectural firms, proposing personalized and unique lighting

solutions. In these cases, lighting products can be sold either directly to the

final client or via distributors. Furthermore, Flos relies on showrooms for sales

of its Architectural and Design collections. These showrooms are corporate

shops operating either through B2C or through B2B models. Finally, in those

markets where these sales channels are not available, Flos relies on exporters,

which allow final customers and intermediaries to be reached in Countries

where a direct sales activity is not present.

Client proximity in the digital

era

Flos’ commitment to combine client needs and technological innovation is

directly linked to the continuous improvement of its digital channels. The

Group ultimate goal is to offer new experiences to its customers, whether it

be in the form of a product, or in the access to Flos’ creations. With respect

to the latter, 2019 has witnessed the redesign and re-engineering process of

its Professional website: thanks to a multi-level and multi-purpose stakeholder

survey, the main needs of Flos customers and stakeholders have been

identified and translated into a new architecture and wireframing site.

As a fundamental result, the new website will separately address retail

customers and professionals so that it can build a user experience and the

underlying structure in a way that allows users to find what they are looking for

with the suitable level of detail. The ultimate goal of Flos Professional website

is to gradually implement new features in order to respond to the incoming

needs and requests of a wide and assorted audience, used to interact with

advanced services capable to catch their needs in an easy and transparent

manner. Furthermore, a series of new analytic instruments has been integrated

in the new website structure, so as to continuously respond to the needs

of Flos’ clients thanks to a constant monitoring of their expressions’ flow.

Flos believes that the new Professional website will help to both unleash the

true potential of its iconic creations to impact the creations of many lighting

professionals as well as to strengthen the communication of its wide range of

solutions and services.

followers

128k

followers

607k

54


Flos is also strongly focused on monitoring clients' claims regarding product

malfunctioning or faultiness, with the aim of improving the overall process,

thus enhancing customer satisfaction. In the event of claims, Flos evaluates,

on a case-by-case basis, the best solutions in terms of both costs and

customer satisfaction. For instance, the Company may either recall the

product to analyze the causes of its malfunctioning, substitute it immediately

or, in case of widely installed systems, send a Flos technician from the internal

quality department to conduct a site visit in order to identify more suitable

solutions.

Moreover, since 2018, Flos' front office organizes periodic meetings once

every quarter involving specific departments – i.e. quality, production and

R&D – to report and analyze the complaints received and evaluate corrective

actions. The Group monitors the number of products returned for faultiness

reasons and the evolution of the quality indicator, which is calculated as the

ratio between the cost of returned products for faultiness reasons and the

total costs of goods sold. This indicator, which includes Flos, Ares and Antares

collections, and contributes to determining employees' yearly bonus, has

significantly decreased in 2019 recording a -30% drop with respect to 2018.

Quality Indicator U.M. 2017 2018 2019

Cost of returned product for faultiness on cost of goods sold % 1.28 1.51 1.06

An additional relevant aspect, which demonstrates Flos' attention to its

customers, is the importance devoted to the timeliness of deliveries.

Regarding the Decorative collection, the time lag between orders and

deliveries is usually less than 6 days while for the Outdoor collection its

variability depends on client requests and needs: in general, due to the higher

complexity of crafting outdoor products and to Ares’ structural characteristics,

lead time split for orders and deliveries is set at 12 days.

Flos World

55

Time lag - Decorative Collection

> 6 days

63% 37%2018

< 6 days

2019 69% 31%

Time lag - Outdoor Collection

> 12 days

56% 44%2018

< 12 days

2019 86% 14%

56


In the first few months of 2020, Flos value creation has been heavily impacted

by the Coronavirus (COVID-19) pandemic in all its dimensions, from product

development to client relationship. The spread of the disease is hitting hardest

in areas where the Group has important production units, i.e. Lombardy

region. Health and safety has always been the Group’s absolute priority during

these months, and Flos is doing whatever it takes to guarantee business

continuity while several teams are determinedly working to help mitigate the

risks. As a result, numerous measures have been taken to prevent and combat

the possibility of contagion.

Capitalizing on its intrinsic flexibility and agility, Flos has been able to

implement drastic measures since day one of the pandemic outburst: more

stringent health and safety protocols than the ones required by local law have

been timely put in place; a vast mapping of Flos’ people vulnerabilities and

greater exposure to the possibility of contagion has been carried out with the

aim of fostering remote working as a means of protection and direct support,

which has been thoroughly provided to suppliers facing both economic and

operative challenges, such as the supply of personal protective equipment.

At an operational level, following the prescriptions issued by the government,

the plants of Bovezzo, Collebeato and Bernareggio suspended production

since March 13th, 2020, before the official suspension by decree on

March 22nd. The Prime Minister’s Decree of April 10th, 2020 extended the

containment measures, including the closure of production activities until May

3rd, 2020 (Flos restarted its activities on April 27th thanks to its qualification

as an activity with strategical relevance). Although, following this date, all

production sites in Europe have gradually reopened. The overall severity and

forecast of the Coronavirus pandemic are currently uncertain, therefore Flos

cannot predict how it could impact its downstream markets and production

chain.

Impact of the Covid-19

pandemic

Flos World

57

Sustainability Report cover

2015 2016

20182017

report

2018

2019

58


Sustainability path

In 2015, Flos strengthened the commitment towards

its stakeholders by publishing its first Sustainability

Report. Since then, Flos started a process of

identification and prioritization of its social and

environmental impacts as well as a monitoring

process of the most significant key performance

indicators with an increasing degree of awareness

and knowledge. Furthermore, in November 2015, Flos

subscribed to the United Nations Global Compact

(UNGC), a global coalition of companies committed

to voluntarily aligning their operations and strategies

with ten universally accepted principles in the areas of

human rights, labor, environment and anti-corruption.

Companies participating in the Global Compact

initiative are required to communicate annually on

progress made by implementing the ten principles

in order to inform the Company’s stakeholders (e.g.,

investors, consumers, civil society, governments,

etc.). This Sustainability Report represents Flos'

Communication on Progress.

Flos World

59

A big leap was then taken in 2019, when Flos decided to further reinforce its

commitment to sustainability by formalizing its first Group Sustainability Poli-

cy. The document is the outcome of a cross-functional process that witnessed

the active participation of Flos’ management and was later made available to

the Company’s internal and external stakeholders through dedicated commu-

nications as well as through the corporate website. The Policy aims at unfold-

ing Flos’ engagement and strategy towards the most preeminent sustainability

issues and it exemplifies what sustainability means for Flos by defining a

high-level of commitment in its introductory part, the pivotal principles and

values which constitute the basis for the sustainability path, and, finally, the

three strategic pillars around which the Group commits to focus its sustaina-

bility-related activities on.

Energy And Materials Flos aims at improving its overall environmental footprint along the value chain. Aware that global challenges are closely linked to energy and materials, respectively interconnected to climate change and circular economy aspects, Flos strives to mitigate and optimize its direct and indirect consumption of these resources.

Development and Wellbeing Flos believes that its employees, through their passion and expertise, represent the essence of its brand success worldwide. Flos puts its workforce, regardless of their role, at the center of its strategies aiming at cultivating an inspiring, inclusive and motivating working environment.

Heritage and Know-How Flos’ most valuable asset in the path towards sustainability is strongly related to its heritage of design icons and its technological know-how. Flos is therefore committed to actively exploiting its intangible resources to contribute to addressing the challenges that the lighting industry, both from an artistic and a technological standpoint, is facing.

Thus, in line with the Sustainability Policy and with the UNGC commitment

to take concrete action in support of the 17 Sustainable Development Goals

(SDGs) of the 2030 Agenda for Sustainable Development, Flos underwent a

profound restructuring of its 2019 Sustainability Report by focusing on the

sustainability pillars identified. Accordingly, this document is divided into three

main chapters, one for each strategic pillar: the chapters open with a new

frontispiece made up of the reference pillars’ definition and scope, and ac-

count for the material topics relevant for the pillars and for the SDGs linked to

them. Finally, a highlight section summarizes the Chapter’s main findings at a

glance. The identification of the areas in which Flos can contribute the most,

and their deep and purposeful integration in the present Report, represents the

first step towards a more strategic and solid commitment towards sustainability.

60


1. Energy and Materials

Flos aims at improving its overall environmental footprint along the value chain. Aware that global challenges are closely linked to energy and materials, respectively interconnected to climate change and circular economy aspects, Flos strives to mitigate and optimise its direct and indirect consumption of these resources. In this regard, Flos is committed to:

• continuously monitor its energy and materials consumption as well as the related greenhouse gas emissions generated;

• identify and carry out optimisation activities intended to progressively reduce environmental impacts related to energy and materials;

• balance product's quality, performance and durability with environmental burdens by implementing the best available technologies and solutions.

MaterialTopics

Sustainabilityof lighting systems

Product qualityand compliance

LogisticsEmissions

and ClimateChange

Sustainabilityof materials

Product innovation

UnitedNationsSDGs

Highlights67%the share

of recycledwaste over the total

25,424the total energy

consumption in GJ33%

the electricity certified as produced from renewable sources

Energy and Mater ia ls

61

For Flos, the improvement of its environmental footprint in its broader

meaning – thus including both product manufacturing and the product’s

life – has always been a fundamental part of its sustainability mindset. This

commitment is put into actions by Flos on a continuative basis while carrying

out its core business activities, from R&D and product conception to the

performance monitoring over its entire life cycle. Considering that from

a business perspective the demand for lighting products is continuing to

increase as a consequence of global population growth and urbanization, the

most urgent concern for the industry is not only to decouple demand growth

and environmental impacts, but also to foster the incorporation of global

challenges within the way in which the whole industry operates.

Sustainability awareness in the lighting sector has gradually increased in the

last decades mainly through improvement in energy efficiency regulations and

the spread of voluntary certifications, thus stimulating different players through

the development and enhancement of more efficient lighting technologies. If

some years ago the industry underwent a paradigm shift from conventional

lighting to Light Emitting Diodes (LED) – which unleashed less energy

consumption together with automated and intelligently controlled system

opportunities – attention is now moving towards the so-called "human centric

lighting", which considers the impacts of artificial light quality on people's

wellbeing and emotions. Furthermore, the lighting industry is joining many

other industrial sectors in the growing interest for the transition from a linear

to a circular economy model aiming at decoupling economic growth from the

consumption of finite resources. This objective can be achieved through a

twofold strategy: a so-called regenerative design, which extends the product

life cycle, optimizing reuse, refurbishment and recycling techniques in order

to increase resource productivity; and modularity, namely facilitating the

disassembly or maintainability of products, in order to improve their durability

and to reduce their overall environmental impact. Finally, as part of the broader

manufacturing sector, the lighting industry is also called upon to progressively

reduce its direct and indirect greenhouse gas emissions (GHG), closely linked

to energy efficiency, so as to effectively address climate change.

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1.1 Balancing Languages of light and environmental challenges

Flos deeply believes that no single company, as

innovative and disruptive as it may be, is able to

consistently tackle the above-mentioned global

challenges. Instead, the transition towards a low

carbon and circular economy require joint efforts of

all the industry players at a systemic level. Based on

this overarching aim, the proactive participation to

industry associations has been in Flos’ DNA from the

outset. Indeed, Flos’ contribution aims at shaping the

development of new and more effective national and

international regulations and standards regarding the

lighting sector through tight cooperation with peers.

Thanks to its participation in Assoluce and other

industry associations’ technical departments, Flos is

at the forefront of several working groups that aim to

discuss new regulations and standards to safeguard

both the lighting industry and final customers. Such

working groups take place both at a national (e.g.

CEI – Italian Electrotechnical Committee) and an

international level (e.g. IEC/CENELEC – International

Electrotechnical Commission and European

Committee for Electrotechnical Standardization).

M/543The EU Mandate on the

development of eco-designrequirements related to

material efficiency aspects

EU 2019/2020The eco-design Regulation forLight Sources, also related tocircular economy principles,

published in 2019


63

In 2019, Flos' activity continued like the previous year to focus on the new

edition of the IEC/EN 60598-1 safety standard, specifically targeting the

new LED light sources – the publication of which is foreseen later in 2020. In

addition, the Company contributed to the amendment of the IEC/EN 60570

standard about electrical supply track systems for luminaires, published at the

end of 2019. Furthermore, Flos worked on the alignment of the two above-

mentioned IEC/EN standards, focusing in particular on track systems and

magnetic suspensions in luminaires: this aims at ensuring a better coexistence

between safety requirements and the evolution of the lighting sector.

Flos has also been tightly collaborating with Lighting Europe for the promotion

of regulations embracing a circular economy perspective, mirroring and

confirming the trend that sees the lighting industry as the leading actor in

the diffusion of energy efficiency solutions. Also, the industry sector has a

strong record in prolonging the products lifetime as well as in recycling and in

reducing hazardous waste. Finally, in the next few years, Flos will be actively

involved in the Electromagnetic Compatibility Directive.

In 2019 a further activity related to material efficiency started in IEC (TC 34

AG 16 Standardization Strategy), with the purpose of providing a strategic

plan, liaison coordination and issuing deliverables to the benefit of global

electronic industries. The ultimate aim of this entity is to ensure that the

actions approved at EU level are duly taken into consideration on a worldwide

scale. This aspect is of fundamental and strategic importance to Flos, since

the potential inhomogeneity between regulations from one Country to another

where the Group is present may entail additional challenges as far as the

compliance to different rules and procedures applying to lighting products is

concerned.

Flos’ participation in industry associations

Assil Flos is an associate of Assil, the Italian Association of Lighting Manufacturers founded in 1995, which includes about 80 Italian Companies representing over 50% of the Ital-ian market turnover in the lighting segment.

FLA Flos and Ares are members of Assoluce, the Italian national association comprising more than 150 luminaire manufacturers, part of FederlegnoArredo, the Italian wood and furniture industry association.

64


6 WG Better Enforcement: Better Enforcement is key to providing safe and quality products for people, and a level playing field for the industry.- WG Sound Product Rules: this WG works with regulators to shape good rules that foster quality products and innovation, and works with the industry to help implement these rules.- WG Value of Lighting: this WG works to spread the concept that light can have important consequences on people's daily life (e.g affecting mood, cognitive performance, sleeping patterns, and so on).- WG Sustainability: this WG operates to support the lighting industry in taking the lead in sustainability, first and foremost by delivering significant energy savings for lighting products and systems. It also works to prolong the lifetime of products, to recycle and reduce hazardous substances.

Anfalum Antares is an associate of Anfalum, the Spanish Association of lighting manufacturers that comprises 87 Spanish Companies active in the lighting industry.

Lighting Europe Assil, Assoluce and Anfalum are part of Lighting Europe, the industry association that represents the lighting industry in Europe. Lighting Europe’s mission is to promote efficiency and sustainability of lighting systems, focusing on environmental challenges, human comfort and customers’ health and safety. Lighting Europe is made up of 4 Working Groups (WG)6, in which Flos takes direct action, addressing topics such as

products’ safety and quality, light impact on human life as well as sustainability issues.

Moving to the legislative changes of 2019, the European Commission has

adopted a new Circular Economy Action Plan for sustainable growth. Such Ac-

tion Plan covers initiatives along the entire life cycle of products, for instance

targeting design, promoting circular economy processes, fostering sustaina-

ble consumption, and aiming to ensure that the resources used are remaining

within the EU economy for as long as possible.

The European Commission has also requested that the European standardi-

zation organizations draft new European standards on efficiency aspects for

energy-related products in order to support the implementation of Directive

2009/125/EC. Furthermore, it foresaw Mandate M/543 with the aim to develop

generic standards which cover eco-design requirements related to material ef-

ficiency aspects (such as recyclability, recoverability and reusability, durability,

reversible disassembly and end of life extraction time) for any product covered

by the aforementioned Directive. Following the Mandate, CEN-CLC TC/10 has

drafted generic standards on the different subjects related to material efficien-

cy as required by the Commission.

The Eco-design Regulation for Light Sources, also known as the Single Light-

ing Regulation (SLR), published in December 2019 and entered into force in

the same month, provides a further input to the implementation of circular

economy principles. Article 4 (that covers Containing Products, like luminaires

with an integrated light source) specifies the requirement to provide informa-

tion to users regarding the possibility (or impossibility) to replace integrated

light sources and separate control gears with the use of common available

tools and without permanent damage to the containing product, unless a tech-

nical justification is provided and made available by the manufacturer.


65

As a direct consequence of the Regulation, unless a technical justification

concerning the functionality of the containing product is provided in the tech-

nical documentation, only products with removable light sources and control

gears can be placed on the EU Market. Furthermore, manufacturers are also

required to provide information about how light sources and separate control

gears can be dismantled.

The new Eco-design Regulation does not only introduce higher energy efficien-

cy limits for the light sources and requirements about “Circularity” but it also

provides new “performance” requirements, like for instance those on color

rendering, displacement factor, survival factor, color consistency and, flicker.

Compliance to these requirements shall be ensured in due time to be ready for

September 2021.

Key applicable regulatory requirements for Flos

• Low Voltage Directive (2014/35/EU), on placing electrical equipment

designed for use within certain voltage limits on the market with the

objective of ensuring the safety of low voltage electrical equipment on the

EU market;

• Electromagnetic Compatibility (EMC) Directive (2014/30/EU), that regulates

the electromagnetic compatibility of equipment;

• Radio Equipment Directive (2014/53/EU), on the harmonization of the

European Member States laws establishing a regulatory framework for

placing radio equipment on the market;

• Eco-design Directive (2009/125/EU), adopted in October 2009 by the

European Regulatory Committee, established a framework for the adoption

of eco-design requirements for energy-related products;

• Eco-design Regulation, (2019/2020/EU), the main requirements of which

will enter into force in September 2021, requires an improvement of energy

efficiency of light sources and introduces new functionality and information

requirements for light sources, control gears and containing products.

• Performance requirements, such as photometric tests, carried out

according to international standards, used for lighting design;

• Product labelling, in this respect in 2017 Flos took part in a working group

with Lighting Europe and the European Commission with the aim of defining

obligations regarding energy labeling (and the relevant energy classes

66


rescaling). In 2021 new labelling requirements for the lighting products will

be in force (2019/2015/EU). Manufacturers of containing products, with

integrated light sources (i.e. LED), will be required to provide the energy

efficiency class of the light source. In addition, working groups tackled

the European Registry for Energy Labelling (EPREL) database (Regulation

2017/1369/EU), which requires the European Commission to establish a

product database where all new models, covered by an Energy Labelling

regulation, have to be registered before they can be placed on the EU

market for the first time;

• Restriction of Hazardous Substances (RoHS) Directive (2011/65/EU and

2015/863/EU), on the restriction of the use of certain hazardous substances

in electrical and electronic equipment;

• Product disposal, such as EU WEEE Directive (2012/19/EU), Waste

Electrical & Electronic Equipment). In particular, in August 2018 the WEEE

Directive changed the product categorization to the so called "Open

Scope"; the existing ten product categories were reduced to six and

more products are now covered by the Directive, such as heat exchange

equipment, monitors and lamps;

• "Safe Drinking Water and Toxic Enforcement Act", a Californian law known

as Proposition 65, among other issues, was set out to inform the public

with warning labels about the presence of toxic substances that may cause

cancer and/or birth defects in consumer products. In order to check Flos

products' compliance with the requirements of Proposition 65, during 2018

the Company, with an external qualified laboratory, started a program aimed

at testing the possible exposure to toxic substances (e.g. lead, phthalates)

with foreseeable use of the product, based on the most restrictive standard

methods.

Besides improving energy efficiency, Flos is also undertaking a gradual

implementation of circular economy principles in its product design and

production, for instance by guaranteeing the possibility of replacing the

lighting source. Such possibility is guaranteed to all Flos' indoor lighting

products for domestic use – also with the availability of spare parts –, an

aspect that goes hand in hand with the products renowned durability. In

addition, Flos takes into consideration, throughout the conceptual design

process and the selection of materials and suppliers, the durability of the


67

materials composing the lighting systems. Indeed, in its R&D activities, Flos

is outlining a way to reconcile efficiency, sustainability trends and requests

with its identity and philosophy, as well as with clients' quality and aesthetics

expectations. The continuous effort in researching and developing new

solutions to both reinvent iconic products and innovate with brand-new ones

can lead to breakthrough outcomes as far as the materials used in crafting and

packaging are concerned.

In particular, 2019 has been centered in deepening the quest for innovative

materials that will allow Flos to improve the way its products are crafted

while also impacting the effect these have on the environment during their

life cycle. Indeed, the core of 2019 R&D activity can be summarized by the

twofold concept of material and product innovation, thus concentrating on

materials as a way of finding new answers that enable to properly respond to

the need of reducing products environmental footprint, in some cases also by

redesigning Flos’ historic icons.

In this direction, during 2019 Flos explored 3D printing techniques as a way

of manufacturing innovative bio-based materials such as polylactic acid

(PLA). PLA is a compostable thermoplastic polyester made up of renewable

natural resources, thus substituting petroleum-based polymers. This bio-

based material, that can be produced starting for instance from starch, is

particularly interesting from a technical standpoint since its mechanical

properties resemble those of traditional plastics such as polyethylene (PE)

and polypropylene (PP). Different environmental savings can also arise from

filament 3D printing applications thanks to the possibility of significantly

reducing scraps. In the computer numerical control (CNC), namely machinery

directly controlled by an external computer like 3D printing, up to 70% of the

materials used for making parts can end up as waste depending on materials

and applications. Instead, since additive manufacturing does not consist in

cutting parts off a larger piece of material, but rather in creating the item by

printing the material layer after layer, the overall amount of resources used can

be reduced, thus unleashing both environmental and cost savings. Finally, the

specific 3D printer module currently in use by Flos’ R&D department for these

research activities does not emit hazardous substances during the printing

process, making it perfectly suitable to be installed in offices and labs without

68


Product quality oversee

exposing workers to dangerous air emissions.

Besides 3D printing and PLA applications, in 2019 Flos has also started

investigating new plastics with reduced environmental impacts by

collaborating with key industry players. The final aim of these research

activities for Flos is to try to overcome the potential technical limitations, that

in some cases characterize these new materials, to guarantee the emotional

quality inherent in Flos’ designs.

For Flos, quality epitomises the perfect blend of aesthetics, compliance and

attention to detail. With the aim to improve the production process and to offer

clients high-quality products, Flos and Antares implemented ISO 9001 Quality

Management Systems, which are certified by independent third parties and

cover the design, production and sales activities of luminaires. In 2019, Ares

followed through the process of implementing a similar Quality management

System and of obtaining the certification, finally achieved later in February

2020.

In order to fulfil all requirements and standards, Flos has its own internal

laboratories, which are accredited to verify product safety compliance (few

tests are carried out externally). Compliance with the applicable regulations

guarantees that all Flos' product categories are assessed with respect to

health and safety impacts across their life cycle.


69

Product development with recycled materials

70


The most relevant environmental impacts from Flos'

overall production process come from outsourced

activities and, only to a limited extent, from the

assembly and packaging activities carried out in

Bovezzo and Valencia and from manufacturing

processes carried out in Bernareggio. Impacts mainly

relate to the following environmental aspects: material

consumption, energy consumption, scraps and waste

from production and assembly (including disposed

process water containing toxic substances employed

in the coating and painting processes) and indirect

emissions from logistics.

Flos is conscious that, in order to be effective,

a forward-looking sustainability strategy must

encompass environmental footprint assessments

and impact reduction initiatives along the entire

value chain. In this sense, starting from the R&D and

design phase, Flos focuses on selecting materials and

production processes that, in line with the aesthetic

profiles and quality requirements of products, ensure

environmental respect, with the aim of reducing its

overall footprint. To do so, Flos actively monitors the

environmental impacts generated by its activities

on a continuous basis, progressively integrating

those impacts occurring outside its organizational

boundaries as well.

1.2 Monitoring and optimising resource consumptions

Logistics department


71

Painting department

72


Ares' environmental impacts Ares' headquarters, located in Bernareggio (Monza and Brianza province,

Italy), covers an area of 12,000 m2 including R&D department, testing

laboratories and a painting and coating system. In addition, the plant also

has a specific division fitted with an automatic assembly line for circuit

boards and a production department for wiring and assembly activities. Ares

manufacturing activities entail both water consumption and air emissions,

mainly related to painting processes and the work of the electronic circuit

division, which comprises, for instance, welding activities and the use of

chemical compounds. In line with current legislation, Ares' facilities are

fitted with an air treatment system for the abatement of particulate and other

hazardous compounds as well as a water treatment plant authorized for

effluent discharging both in the sewage collection system and on the ground.

External specialists carry out wastewater and air quality analyses on a regular

basis in order to guarantee both compliance with normative limits and the

correct functioning of treatment plants. In order to further strengthen its

commitment towards environmental protection, in 2019 Ares started a process

for aligning its Environmental Management System (EMS) with ISO 14001:2015

guidelines, finally achieved later in July 2020. Ares also aims at obtaining a

third-party certification within 2020 so as to step up its efforts for enhancing

environmental performances and achieving environmental objectives.

1.2.1

Materials and waste

Flos is addressing its most pressing environmental challenges by focusing on

less impactful and more innovative techniques, reinventing, where possible, its

iconic products. The Company accurately monitors the amounts of materials

and components purchased to produce its lighting systems, as well as the

related waste produced, and is committed to reduce the use of non-recyclable

or toxic materials.

54%Decrease of polyurethane

foam purchased with respectto 2013

3,230Tonnes of materials processedwithin Flos, Ares and Antares

facilities


73

7 Intensity ratios refer to net sales of Flos, Ares and Antares.8 Zamak is a family of alloys with a base of zinc and alloying elements of aluminum, magnesium and copper.

Processed Materials7 U.M. 2017 2018 2019

Glass t 191 209 208

kg/k€ 1.17 1.24 1.21

Plastics t 346 380 355

kg/k€ 2.11 2.24 2.07

Aluminum & Zamak8 t 2,194 2,029 2,025

kg/k€ 13.39 11.97 11.81

Iron t 442 626 585

kg/k€ 2.70 3.69 3.41

Gypsum t 60 52 49

kg/k€ 0.36 0.31 0.29

Brass t 37 51 38

kg/k€ 0.23 0.30 0.22

Rubber t 5 4 10

kg/k€ 0.03 0.02 0.06

Marble/Concrete t 405 371 424

kg/k€ 2.47 2.19 2.47

Concerning the procurement and processing of raw materials, all materials

showed a moderate decreasing trend in 2019 with respect to previous years’,

both in absolute terms and in relation to net sales, with the only relevant

exception of marble and, less evidently, rubber. In particular, concrete and

rubber are materials mainly used in Ares' outdoor collections. With respect

to last year’s figures, the gypsum category has been introduced for the entire

three year-period and the amount of marble for the Decorative collection has

been added.

In addition to the abovementioned raw materials, the Bernareggio plant also

purchases chemical components for painting and coating activities. In 2019,

these compounds, that include paints, artificial resins and silicones, amounted

to 13.1 tons, showing a decrease amounting to 12.9% with respect to 2018.

The trend in electronic components purchased continues to mirror the industry

74


Electronic Components U.M. 2017 2018 2019

Transformers & power supply units 436,511 706,722 646,025

units/ k€ 2.66 4.17 3.77

Electrical components units 6,820,962 6,658,154 5,674,954

units/ k€ 41.63 39.28 33.08

LED and LED components units 5,826,083 6,843,040 6,888,141

units/ k€ 35.56 40.37 40.15

Traditional lamps units 22,630 11,931 5,545

units/ k€ 0.14 0.07 0.03

In addition to the use of raw materials and components to produce lighting

systems, another relevant impact arising from Flos' business derives from

packaging. Flos' objective is to reduce the amount of packaging materials

used and to improve their recyclability while ensuring an adequate protective

barrier during transportation. In this direction, Flos continued the work

started in 2018 concerning the progressive replacement of non-recyclable

polyurethane foams with cardboard boxes, specifically studied and developed

to deliver the same packaging protection standards during the transportation

for all the new collections from the Bovezzo plant, with a much lower

environmental impact. The project allowed Flos to record a significant 54%

decrease in the purchase of polyurethane foams in 2019 compared to 2013,

the year the project was launched. Finally, Flos is continuously striving to

find new, innovative solutions regarding the substitution of current packaging

switchover from conventional light sources to LED solutions, due to the spread

of this less energy intensive lighting technology. Indeed, 2019 confirmed the

steady increase in LED and LED components purchased, even though there

was a much more stable variation with respect to the two prior years. For the

architectural segment the transition to LED sources is almost complete, also

as a consequence of the market and of competitors' and final customers'

requests. For the Decorative collection, the downward trend of traditional

lamps purchased is also attributable to Directive 2015/1428/EU, that requires

companies not to sell lamps together with traditional light bulbs, thus allowing

the customer to buy the preferred solution among LED and traditional sources.


75

Packaging Materials U.M. 2017 2018 2019

Paper and cardboard t 1,047 1,133 1,049

kg/k€ 6.4 6.7 6.1

Plastics t 79 78 70

kg/k€ 0.5 0.5 0.4

Wood t 302 371 309

kg/k€ 1.8 2.2 1.8

67%the share of recycled waste

over the total

475the total tonnes of waste

produced

Moving to the downstream of materials lifecycle, Flos' waste production is mainly

related to faulty components that do not meet product aesthetics and quality

requirements and that are thus sent back to suppliers. Whenever possible, in

the event of faulty products, undamaged components are separated and reused

to minimize waste volumes and maximize resource recycling.

materials with alternatives that can either be recycled or guarantee a smaller

environmental impact.

Moreover, in the belief that prevention is the most effective approach for

eliminating waste, Flos is engaged in the training of its suppliers, in order to

reduce cases of non-compliance of input materials. In particular, Flos inspects

and monitors the percentage of defective components coming from different

suppliers and the reasons for their return, in order to identify the suppliers

experiencing more difficulties, to discuss with them the implementation of

potential corrective actions and to provide them with the necessary tools and

training to put them into practice. This aspect is made directly possible due to

the close relationship that ties Flos and its supply chain, and it is what gives this

business model an inherent added value.

Furthermore, Flos offers its employees the opportunity of buying non-saleable,

76


Waste produced (tonnes)

Waste Produced U.M. 2017 2018 2019

Non-hazardous waste t 523 533 445

Hazardous waste t 32 28 30

Total t 555 561 475

defective products at a discounted price, thus further reducing its total waste

volumes.

Waste produced during the assembly phase occurring in Flos' headquarters

is collected and separated according to its composition to optimize recycling.

Finally, in 2019 Flos continued improving its waste management and recycling

activities. Along with the fostering of a circular way of thinking and behaving

among its employees through, for instance, the improvement of the recycling

process in coffee areas, Flos further increased the separation of waste material

in Bovezzo and Bernareggio plants. In particular, in Bovezzo a container divided

in three parts to separately collect iron, brass and aluminum wastes was

installed. In addition, Flos reviewed its suppliers list to select the best providers

to ensuring the correct disposal and/or recycling of waste produced.

Thanks to this approach, in 2019 the percentage of recycled waste over the total waste produced rose from 55%, to 67% in 2018. The separated collection of polyethylene in the Bovezzo plant, introduced in 2017, continues to deliver results: in 2019, this choice allowed for the addition of a further 5.6% reduction of unsorted waste production with respect to 2018, allowing for continuation on previous years’ steady decrease trend. The Group’s overall reduction of non-recycled waste amounted to almost 37% on a yearly basis, peaking at an all-time low of 159 tonnes since 2015. The hazardous waste is mainly related to the Bernareggio plant: the plant hosts manufacturing phases, such as painting and coating, which require the use of chemical compounds.


77

Waste produced by disposal method (tonnes)

Waste, by disposal method U.M. 2017 2018 2019

Recycled t 311 311 316

Not recycled t 244 250 159

Total t 555 561 475

1.2.2

Energy and GHG emissions

In addition to material consumption, Flos monitors its energy consumption and

the related GHG emissions, which are mainly related to heating and cooling

purposes and to fossil fuel consumption for the corporate fleet. In particular,

the production site in Bovezzo is supplied from the district-heating network

of Brescia, an integrated system providing energy to the city from waste

incineration. Natural gas consumption, instead, derives from the Bernareggio

plant, where it is used for heating purposes and for painting activities.

25,424the total energy consumption

in GJ

33%the electricity certified as produced from renewable

sources

In line with the aim of progressively optimizing resources consumption, Flos

has implemented a sophisticated real-time monitoring system of its energy

consumption levels in the Bovezzo plant. The system, in operation since

January 2018, allows to monitor the energy demand of the different production

processes within the plant, in order to identify the most energy-intensive ones

as well as potential inefficiencies. The final goal is to start from consumption

patterns to progressively implement mitigation or remediation activities in order

to reduce the energy demand and increase the overall efficiency of the site.

The first result of this initiative, reached in 2018, was a 13% reduction of

Bovezzo electricity consumption compared with 2017, a pattern that has very

much stabilized in 2019. In terms of energy mix, this year’s record confirms the

78


2018 trend, thus showing that as much as 45% of energy consumption is linked

to offices, while production absorbs 38%.

Energy Consumption U.M. 2017 2018 2019

Energy consumption - for buildings GJ 22,009 22,950 21,999

-of which: electricity purchased from national grid GJ 9,247 9,168 8,352

-of which: district heating purchased from external waste-to-energy plant

GJ 5,014 5,892 6,277

-of which: natural gas for heating and production processes GJ 7,748 7,890 7,370

Energy consumption - for fleet GJ 2,711 3,593 3,425

-of which: for Company car fleet GJ 2,217 3,342 3,143

-of which: for Company truck fleet GJ 494 356 282

Total GJ 24,720 26,648 25,424

Bovezzo plant's energy consumption

Furthermore, as already carried out in the Valencia facilities over the last few

years, in 2019 the Bernareggio plant completed the replacement of the lighting

systems with more than 300 LED lamps in the warehouse and manufacturing

areas, thus contributing to decouple production volumes and energy demand:

the energy saving is expected to amount to around 15% at plant level.

Energy consumption (GJ)

16% R&D

1% General Services

45% Offices

38% Production Area


79

Flos' commitment to reduce its overall environmental footprint also

encompasses the monitoring of its GHG along the value chain for reduction

and compensation purposes. The majority of Flos' GHG emissions is located

in the final end of the value chain, i.e. concerning logistics activities. All

inbound and outbound transport services are provided by external carriers

and strictly vary depending on the area where the transport is performed.

Depending on the distances, on the time of delivery and on the volumes,

transport is operated either by truck, by ship or by aircraft. Indeed, the

emissions related to the production process are quite limited in absolute

terms: as it has already been noticed, this is mainly due to the fact that, out of

the plants falling within the scope of the reporting perimeter, only Bernareggio

has production processes. Nonetheless, in the past few years, Flos started

putting in place a series of energy efficiency activities aimed at reducing its

overall footprint.

As shown in the table below, in accordance to the GHG Protocol Corporate

Accounting and Reporting Standard and in line with last year, Flos has

identified and monitored all relevant direct GHG emissions (Scope 1) and

those resulting from energy purchases (Scope 2). Moreover, where data are

available and reliable, Flos is monitoring and reporting indirect emissions

occurring outside of the Company in order to extend the analysis to its entire

value chain (Scope 3).

The GHG emissions resulting from the electricity purchased from the national

grid have been calculated both by adopting the location-based and the

market-based method. The first one reflects the average emissions intensity

of grids from which energy consumption occurs while the second reflects

emissions from electricity that the Company has purposefully chosen. In

relation to the latter, starting from August 2018, the electricity purchased by

Flos' Bovezzo is covered by Guarantees of Origin (GO), thus certifying that it

is produced from renewable sources, resulting in zero direct carbon emissions

according to the market-based method. Moreover, from 2021, Bernareggio’s

electricity demand will also be covered by GO certificates.

Regarding logistic-related GHG emissions resulting from the transportation

of purchased goods and sold products (when customers do not manage

80


9 2017 data are related to Flos and Antares (for the latter, only finished products from Bovezzo and Bernareggio and returns from consumers are included). 2018 data also include Ares outbound logistics.

GHG Emissions U.M. 2017 2018 2019

Direct Emissions (Scope 1) tCO2 eq 751 858 783

-Natural gas burning usedfor Company's heating and production processes

tCO2 eq 438 448 418

-Fuel (diesel) usedfor Company's truck fleet

tCO2 eq 37 27 21

-Fuel (diesel) usedfor Company's car fleet

tCO2 eq 225 306 275

-Fuel (gasoline) usedfor Company's car fleet

tCO2 eq 0.86 15 12

-Refrigerant gases resultingfrom leakages of air-conditioning systems

tCO2 eq 51 63 57

Indirect Emissions (Scope 2) – Location Based tCO2 eq 1,172 1,123 1,090

-Electricity purchasedfrom national grid

tCO2 897 816 783

-District heating purchasedfrom the waste-to-energy plant

tCO2 eq 275 307 307

Indirect Emissions (Scope 2) – Market Based tCO2 eq 1,411 1,342 1,029

-Electricity purchasedfrom national grid

tCO2 eq 1,136 1,035 722

-Distric heating purchasedfrom the waste-to-energy plant

tCO2 eq 275 307 307

Other Indirect Emissions (Scope 3) tCO2 eq 2,423 3,590 2,021

-Transportationof purchased goods9

tCO2 eq 454 1,017 613

-Transportation of sold products10 tCO2 eq 1,685 2,261 1,181

-Business travels tCO2 eq 284 312 228

Total Location-based tCO2 eq 4,346 5,571 3,894

Total Market-based tCO2 eq 4,585 5,790 3,837

transportation on their own) as well as from business travels, 2019 data show

an overall significant decrease, mainly due to Ares’ outbound logistics, which

recorded a downward trend with respect to 2018. The trend is indeed a direct

consequence of the optimization process its production and shipping underwent.


81

10 Emissions data from transportation of sold products show, by nature, a fluctuating trend mainly due to the Architectural collection, as a consequence of fluctuating demands from key accounts and other clients, different weights of products and distances covered.11 DHL is an international company providing express deliveries worldwide and logistics services including freight transportation, warehousing and supply chain solutions.12 The Clean Development Mechanism certifies emissions reduction projects in developing countries as well as trading and selling certificates arising from projects in order to meet emissions reduction targets through compensation under the Kyoto Protocol.

Carbon offsetting In order to compensate for the environmental impacts of its outbound logistics

activities, since 2017 Flos has adhered to the Go Green – Climate Neutral

program organized by DHL11, which allows customers to offset their emissions

resulting from the transportation of goods. The methods used for calculating

and offsetting greenhouse gas emissions are based on the Greenhouse

Gas Protocol's Product Life Cycle Accounting and Reporting Standard. The

calculation methodology includes carbon dioxide (CO2) and further GHG

emissions such as methane (CH4) and nitrous oxide (N2O) from transportation

and logistics as well as upstream emissions from fuel and energy production.

GHG Emission not offsetEmission offset with the GoGreen program

2017 16% 84%

2018

2019

30%

59%

70%

41%

On behalf of Flos and proportionally with the emissions resulting from the

transportation service purchased, DHL invests in climate protection projects

complying with the Clean Development Mechanism12 (CDM) criteria set out in

the Kyoto Protocol. Flos and Ares' offset for 2019 amounted to 698 tCO2eq,

thus compensating 59% of the GHG emissions resulting from the transportation

of sold products. The increase with respect to 2018 is mainly related to the

abovementioned decrease of the total amount of Scope 3 emissions. In total,

in 2019 both Flos and Ares contributed to carbon savings equal to the CO2eq

emitted by around 394 passenger cars, which traveled for 10,000 km.

82


2. Development and Wellbeing

Flos believes that its employees, through their passion and expertise, represent the essence of its brand success worldwide. Flos puts its workforce, regardless of their role, at the center of its strategies aiming at cultivating an inspiring, inclusive and motivating working environment. To this extent, Flos undertakes to:

• invest in training activities and development programs dedicated to employee personal and professional improvement;

• promote a rewarding and inclusive working environment in order to recognise and empower employee talent, in line with everyone's potential and aspiration.

MaterialTopics

Employeecare

Diversity

Occupationalhealth &

safety

UnitedNationsSDGs

Highlights446Flos, Ares and

Antares workforce

3,644Training hours

0.8Injury rate

Development and Wel lbeing

83

Flos has always strongly believed that the role its

people have in shaping strategies and business

decisions is key to the brand’s history and today’s

achievements. This commitment is built on the

Group’s daily operations by understanding its

employees’ personal and professional needs and by

fulfilling them through both cross-cutting initiatives

and tailor-made activities.

2019 has marked a fundamental year as far as

Flos’ people are concerned. In fact, a change in

the management effort was inaugurated with the

aim to strengthen the collaboration between both

functions and the Group’s companies: from the top

of the chain to the bottom, teamwork has been put

at the core of Flos’ daily life, enabling it to liberate

breakthrough creativity, confidence and performance

in the activities carried out at all levels. This way

of reasoning as an unicum rather than as different,

segregated pieces unfolds the Company's internal

talent, both essential for the single employee as for

the Group. An integral part of this process is the

spread of the multi-faceted concept of sustainability

as a competitive advantage, thus requiring an

increasingly strategic and pivotal role.

84


13 Average number of full-time equivalents (FTE) derived by taking into account employees employed under both permanent and temporary contracts of service, in each month.14 Data does not include Flos USA Inc. and Flos' commercial branches.

2.1 Employees as the essence of brand success

In 2019 Flos Group's workforce, including Flos USA Inc. and Flos' commercial

branches, totaled on average 651 persons13, showing an increase with regard

to the previous year (619). Flos, Ares and Antares’ workforce amounted to

446 people, showing an overall increase with respect to 2018, and included

24 supervised workers and 8 interns. The steady growth recorded in the last

few years, the high percentage of permanent contracts and the relatively low

turnover rate witness Flos’ long-lasting attention towards its people.

446Flos, Ares and Antares

workforce

93%Percentage of employees over

the total workforce

69% of the employed personnel is located in the Italian plants of Bovezzo

(160 employees) and Bernareggio (84 employees) and they mainly comprise

office workers (61% of the total, in 2019). Women and men are proportionally

balanced as far as the employee population is concerned (44% and 56%

respectively), with a slight increase in female presence with respect to 2018

(+7%). Also, the predominance of employees between 30 and 50 years old

(67%) has been confirmed.

Workforce By Category And Gender14

U.M. 2017 2018 2019

Total workforce n. 444 438 446

Employees n. 397 401 414

Supervised workers n. 33 28 24

Interns n. 14 9 8

Workforce by gender

Women % 44% 43% 43%

Men % 56% 57% 57%


85

2019 230184

172 225

172 2292018

2017

MenWomen

Employees, by Gender Full-time vs Part-time Employees

6% 94%2019

Full-timePart-time

Employees, by Category Employees, by Age

61% Office Workers

6% Middle Managers

3% Executives

30% Workers

67% From 30 to 50 years

7% Less than 30 years

26% More than 50 years

Employees by Gender andContract Type

U.M. 2017 2018 2019

Permanent n. 365 375 395

Women n. 160 165 174

Men n. 205 210 221

Temporary n. 32 26 19

Women n. 12 7 10

Men n. 20 19 9

Total n. 397 401 414

86


In 2019, Flos confirmed its strong commitment to retain its talents and to

enhance their sense of belonging also by guaranteeing permanent contracts,

increased by 5.3% on a yearly basis and covering a 95% share of all

contracts. In 2019 the percentage of part-time employees slightly increased

(reaching 6%), demonstrating Flos’ attention to its people and the need of

a personal and professional life balance. Furthermore, all Flos employees

are covered by collective bargaining agreements, as required by Italian and

Spanish national laws.

Regarding hires and terminations, the graph shows a moderate opposite trend

for both metrics compared to 2018. In particular, the hiring rate – the ratio

between the number of hires and the total number of employees at the end

of the reporting year – peaked to an all-time high of 11.4% (with an increase

amounting to 38.2% on a yearly basis). On the other hand, the turnover

rate – the ratio between the number of job terminations and the number

of employees – followed the constant trend of the last two years, slightly

increasing to 8.2% (+13.3% on a yearly basis).

Employee Hiring And Turnover Rates

Terminations by Gender and Age U.M. 2017 2018 2019

Women n. 15 19 13

Men n. 16 11 21

Less than 30 years old n. 4 6 9

From 30 to 50 years old n. 21 16 19

More than 50 years old n. 6 8 6

Total Terminations n. 31 30 34

Hires, by Gender and Age U.M. 2017 2018 2019

Women n. 13 19 24

Men n. 24 15 23

Less than 30 years old n. 12 11 16

From 30 to 50 years old n. 24 22 29

More than 50 years old n. 1 1 2

Total Hires n. 37 34 47

Hiring rate Turnover rate

20192017 2018

11.4%9.3% 8.5%

7.8% 7.5% 8.2%


87

2.2 Training for personal and professional improvement

In the last five years, Flos has embarked on a journey of important investments

both in terms of financial and time resources aiming at the development of its

people. In 2019 only, for instance, the headquarters in Bovezzo recorded a

+94% in the training expenditure with respect to 2015. Even though training

hours have decreased compared to 2018, 2019 can indeed be framed as

a consolidation year considering the low turnover rate and the subsequent

decrease of training needs due to last years’ investment trend. In the coming

years, Flos undertakes to deliver on the commitment of continuous investment

on its own people by maintaining the steady level of training activities and by

continuing to monitor both the market and peoples’ needs.

3,644Flos, Ares and Antares total

training hours

+94%Flos' increase in training

expediture compared to 2015

To continuously funnel personal and organizational improvements, in recent

years Flos has designed and implemented a dynamic and personalized training

program, aligned to the different employees’ expectations and corporate

responsibilities. The program was conceived to help employees realize their

full potential, both in terms of soft and technical skills necessary to meet the

Group’s evolving requirements and to adapt to the technological national

and international legislative changes. When designing this program, Flos

considered employees’ training needs and identified a set of minimum training

requirements for every cluster of functions. The training program involves both

ad hoc courses (e.g. e-commerce) and non-technical training ranging from

legislative requirements (e.g. RoHS, Eco-design, import and export) to public

speaking and English, French and German lessons.

In addition, during 2019, Ares underwent a profound restructuring of its

own training projects, thus embarking on a process that led to a significant

increase in its capacity to track and monitor employees’ school and

professional training background. This pathway, integral part of ISO 9001:2015

certification process – successfully concluded in February 2020 – aimed at

identifying the people of Ares’ strengths and improvement areas with the

objective of structuring ad hoc training opportunities: this continuous flow of

88


information and training needs deep mapping and allows Ares to better take

advantage of its employees expertise while continuing to duly invest in their

skill development.

Along with the continuation of the courses on lean manufacturing, in 2019

a set of new technical courses were carried out, responding to the need

of broadening and sharpening Flos’ people and light designers’ vertical

competences. Thus, with the aim of ever enlarging its capacity to respond

to the most specific commercial requests and to follow through with its

Heritage and Know-how commitment, these courses included, for example:

the lighting techniques and the legislative requirements for residential areas,

hospitality and wellness areas; school areas; workplaces; museums and

churches. Furthermore, the Industrial Engineering department participated in

a course on 3D printing: the course was aimed at exploring the functioning

of a Fused Deposition Modeling (FDM) filament fusion printer, particularly

suitable for molding innovative materials, such as PLA. The latter course is

wholly consistent with Flos’ effort to continuously explore new solutions and

applications for both rediscovering iconic creations and launching brand-new

products.

In 2019, Flos provided a total of 3,644 training hours to its employees,

corresponding to an average of 8.8 hours per employee, showing a 9%

contraction on a yearly basis. In addition, looking at the non-compulsory

training (i.e. excluding training activities required by national regulations,

such as health and safety training), the average training hours per employee

amounted to 6.1 in 2019, covering 70% share of the total number of training

hours provided. In contrast with last year’s trend, training courses were mainly

provided to office workers (10 hours per employee in 2019), while middle

managers’ training hours amounted to 7 each and executives’ to 3 each. With

regard to workers, the average training hours provided continued to rise,

confirming the upward trend highlighted in the last few years and reaching 6

hours per employee in 2019. Flos also provided training to supervised workers

and interns, which amounted to a total of almost 70 hours in 2019. In line with

last year, Flos is committed to provide all its employees with adequate training

in the upcoming years, regardless of employee category and contract types.

Technical training for

leveraging innovation


89

Average Training Hours, By Employee Category

2019

2018

6h

4h

10h

12h

3h

12h

5h 9h 17h

7h

17h

2017

Office Workers Middle Managers ExecutivesWorkers

Training U.M. 2017 2018 2019

Total hours h 3,124 3,885 3,644

Men h 2,048 2,280 2,263

Women h 1,076 1,606 1,381

Average hours h/employee 7.9 9.7 8.8

Men h/employee 9.1 10.0 9.8

Women h/employee 6.3 9.3 7.5

Non-Compulsory Training

Percentage on total training % 86 96 70

Compulsory Training

Percentage on total training % 14 4 30

90


15 The second level contract, as provided by the Italian regulatory framework, is a collective agreement signed between the employer and trade unions that allows derogations from national collective bargaining agreements.

2.3 An inclusive and safe working environment

The work-welfare relation is one of the ways through

which Flos aims not only at rewarding the talent and

passion of its employees but also at creating an

inclusive working environment as a way of looking

after everybody’s personal wellbeing. Flos has indeed

translated this commitment into the provision of a

benefit package that meets employees' needs beyond

mere basic compensation.

In 2019, Flos continued to guarantee benefits such as

meal vouchers, health insurance, invalidity coverage,

fuel vouchers and canteen services. In addition,

Flos continued to promote pay for performance

to recognize everyone’s contribution by offering

performance bonuses related to both product quality

and business profitability. In general, Flos’ approach

is to provide the same benefits to all full-time and

part-time employees and, as far as possible, to

temporary workers. Of the abovementioned benefits,

fuel vouchers are also extended to fixed-term

employees.

Additionally, to provide a wider set of benefits to

its employees, in 2019 Flos implemented an online

platform developed to manage workers’ benefits

and performance bonuses: the web-platform went

online in September 2019, allowing an integrated

and simplified way of discovering and accessing all

the different benefits for both white and blue collars.

In order to help its people become familiar with the

platform – which has been confirmed for 2020 as well

–, the Company offered dedicated training and one-

to-one support sessions to all employees that needed

it. Flos’ objective to extend the benefit package to

all the Group’s companies was put into practice in

2019 through the introduction of the new second level

contract15 in Ares.

Employee welfare


91

Besides the attention to the employees’ welfare, Flos continuously pays the

utmost attention to health and safety aspects by continuously monitoring

the key indicators as well as by fostering a safety culture across all roles and

responsibilities within the Group. In line with these objectives, the Group carries

out, on an ongoing basis, several activities to improve occupational health and

safety and raise people's awareness on these topics.

At the core of the Group’s commitment to guaranteeing high safety standards

are training and education activities. In 2019, a total of 1,111 hours of health

and safety training was provided, amounting to seven times the hours of H&S

training provided in 2018. This growth is mainly due to the frequency of the

activities that are carried out on a two or five-year basis depending both on

training levels and local health and safety regulation requirements. In particular

in 2019, Flos provided training on health and safety topics both in terms of

general and specific training, first-time and continuing education.

Flos’ attention to the prevention and mitigation of work-related health and safety

impacts extends also to supply chain management. Indeed, the Company takes

advantage of the close relationship with its suppliers – above all, the smallest

and nearest ones – by monitoring their performance and work conditions through

frequent, commercial site visits. This aspect allows for a deep integration in the

scope of a long-lasting relationship based on trust, quality and safety.

In 2019, Ares inaugurated its first, three-year long

second level contract integrating the collective bar-

gaining agreement already in force. It covers various

vertical aspects, starting from working hours, good

corporate practices and the promotion of work-related

ethics, to the introduction of a bonus tied to financial,

quality and personal KPIs. In addition, it integrates

KPIs related to suppliers’ quality in the variable re-

muneration in the perspective of an integrated supply

chain. All the performance indicators to which the

remuneration has been linked are also based on ob-

jective parameters and inspired to lean transformation

so as to promote both transparency and the continu-

ous improvement philosophy. Finally, the new contract

will introduce additional welfare measures such as

work permits to take care of relatives in need and

paid leave for medical visits provided by the National

Healthcare Service.

Ares' second level contract

92


16 All data reported in the table refer to Flos, Ares and Antares' employees.17 Calculated by the total number of injuries multiplied by 200,000 and divided by overall number of hours worked in the reporting period.18 Calculated by the total number of hours lost due to injuries multiplied by 200,000 and divided by overall number of hours worked in the reporting period.

1,111The number of training hourson Health and Safety topics

0.8The injury rate

In 2019, Flos updated its risk assessments concerning noise and vibrations,

while adding a new document on chemical risks – as required by law. Along with

the continuous safeguard of its blue collar workers with the purchase of shoes,

gloves, glasses and all other necessary personal protection accessories, an

automatic external defibrillator (AED) was bought in Bovezzo and at the end of

2019 a stabilization and consolidation intervention was carried out after a static

analysis made by a third party highlighted some minor structural flaws affecting

Bovezzo’s warehouse.

During 2019, Flos registered 3 injuries with relatively lower severity (i.e. minor

finger trauma, cuts or contractures) compared with 2018; in 2019, the average

number of lost days related to the 3 injuries equated to almost 10 days per

injury, in line with the 2018 trend. During the 2018-2019 biennium, neither

high-consequence work-related injuries, nor fatalities as a result of work-

related injuries were recorded. Ares’ monitoring of workers whose workplace is

under the Company’s either complete or partial control showed a situation that

perfectly fits the overall employees’ health and safety trend.

Health and safety16 U.M. 2017 2018 2019

Total number of worked hours h 677,470 686,009 714,284

Total number of recordable work-related injuries

n 1 5 3

Rate of recordable work-related injuries17

n 0.3 1.5 0.8

Lost time injury rate18 n 73.2 109.7 73.6


93

Occupational health and safety aspects are directly managed at plant level:

both Flos, Ares and Antares implemented policies and management systems

in accordance with local legislative requirements. Health and safety monitoring

and oversight are focused on the involvement of functions at different levels of

the organizational chart with specific responsibilities for the application of safety

procedures. Risk assessment procedures, for instance, are managed by health

and safety managers, or equivalent, that, in compliance with local applicable

regulations, hold inspections and consult the employees in order to timely

detect risks, duly assess them and propose mitigation efforts to prevent future

accidents. The same procedure applies to work-related injuries, depending

on the severity of the event. As required by law, a risk assessment is carried

out, with the aim of identifying the major risks for the health and safety of the

Company’s employees. The most significant risks outlined are, internal transit

areas, fixed and portable ladders, object storage, means of transportation, fire

and explosion risks, physical workload and load handling, vibrations, noise and

chemical risks. Furthermore, Flos and its subsidiaries have implemented an

internal monitoring system aimed at safeguarding their own people from any

health and safety whistleblowing-related repercussion.

In accordance with legislative obligations, a doctor is an integral part of all H&S

management practices and procedures.

Health and safety

management

3. Heritage and Know-How

Flos' most valuable asset in the path towards sustainability is strongly related to its heritage of design icons and its technological know-how. Flos is therefore committed to actively exploiting its intangible resources to contribute to addressing the challenges that the lighting industry, both from an artistic and a technological standpoint, is facing. In doing so, Flos aims to:

• play an active role in the development of new innovative solutions that are able to enhance people's physical and emotional wellbeing through investing in research and technological innovation;

• promote and disseminate the art and design culture amongst the community as an integral part of its sustainability strategy.

MaterialTopics

Brand protection

ProductInnovation

Training toclients

UnitedNationsSDGs

Highlights83

patents filed to protect Flos'

products

Launch of Flos Light Academy

A platform forstrengthening theconnection with

clients€78,000

the monetary valueof philanthropic

activity

94


Heri tage and Know-How

95

Flos’ outer reach, and thus the relationship that ties

the brand with its community, is the third essential

element of the Company’s Sustainability Policy. In this

sense, the safeguard of Flos’ know-how on the one

hand, and the dissemination of the Group’s heritage

on the other represent the twofold strategy with which

it interacts with the public. This allows to deliver an

ever-ascending level of quality by guaranteeing fresh

initiatives and continuing to build a lasting relationship

with the Group’s stakeholders. Indeed, with its

sustainability commitment, Flos is dedicated to

contributing to the creation of social value tied to the

industry’s national and international artistic heritage

through a continuously renovated legacy that enables

the brand to be recognized as a market icon in the

lighting design world.

96


3.1 Promoting the art and design culture

Contributing to the dissemination of the art and design culture amongst the

community is one of Flos' key commitments in terms of social responsibility

since it allows to deepen the relationship between the brand and its key

stakeholders. In line with this objective, the Group offers its support to

cultural events, exhibitions and design festivals through donations, loans,

light installations and co-organization efforts. For over 60 years, Flos has

collaborated with the most prestigious art, architecture and design museums

across the world. A variety of products has been donated or lent to such

institutions and actually feature in the permanent collections of iconic

museums, such as the MOMA (Museum of Modern Art) in New York, the

Triennale in Milan, and the Centre National d'Art et de Culture Georges

Pompidou in Paris.

"Il design dei Castiglioni"Exhibition comprising the

entire creative activity of thethree Castiglioni brothers for

the first time

"Design Holding Wall"Installation where Flos, B&B

and Louis Poulsen iconicproducts and design masterswere depicted and animated

2019 stood out as a confirmation year for all of these activities: Flos’

commitment has been renewed with established initiatives and with the

inauguration of many new ones. The constant presence through sponsorships,

featured exhibitions and installations in events all around the world allows

the Group to further develop its dedication to fostering design know-how and

heritage. In fact, Flos deeply believes that the concepts of art and design are

tightly intertwined and among the highest disciplines, united by the common

goal of delivering a true social value to the benefit of the wider community. As

a consequence, Flos is constantly willing to be the enabler for the unfolding

of the talent of the most refined artists, able to combine outstanding materials

with innovative ideas by creating something unique. The following represent a

selection of art and cultural events that Flos participated in during 2019.


97

Salone del Mobile Milano 2019

98


"il design dei Castiglioni" exhibition

Jan - Mar 2019 Flos partnered with Pordenone’s Harry Bertoja Gallery for “Il design dei Castiglioni” exhibition, held in the occasion of the 100th anniversary of Achille Castiglioni’s birth. The exhibition comprised the entire creative activity of the three Castiglioni brothers, Livio, Pier Giacomo and Achille for the first time.

Ro Plastic Prize - Guiltless Plastic

Mar - Apr 2019 Flos sponsored the project Guiltlessplastic with the Ro Plastic Prize 2019, an international and intergenerational challenge for the Design Community to stimulate a conscious use of recycled and recyclable plastic. The best projects were presented as finalists at Rossana Orlandi Gallery during 2019 Milan Design Week’s Fuorisalone.

"Things that go together" exhibition

Mar - Jul 2019 Flos was the main sponsor of the first survey exhibition of designer Michael Anastassiades. Organized and presented by NiMAC (The Nicosia Municipal Arts Centre, Associated with the Pierides Foundation) and the Cultural Services of the Ministry of Education and Culture of Cyprus, the exhibition reflected on the designer’s twelve-year practice to date.

Miart Apr 2019 After the great success of the 2018 edition, Flos renewed the collaboration with Miart with a site-specific lighting installation in the exhibition’s VIP Lounge and restaurant area. The installation design has been entrusted to Formafantasma and focused on the new suspension lamp Wireline, an object that can be positioned halfway between art and industrial design.

"Design Holding Wall" interactive installation

Apr 2019 Flos, B&B Italia and Louis Poulsen disclosed their heritage in a playful interactive wall during the Salone Internazionale del Mobile exhibition in Milan, Italy, where their iconic products and design masters were depicted and animated, to reveal stories and secrets of the design process.

Salone Internazionale del Mobile

Apr 2019 Flos has launched the re-edition of one of its cult designs from the Sixties, the lamp Chiara by Mario Bellini, on the occasion of its 50th anniversary, and has also released the first edition of 1957 Achille and Pier Giacomo Castiglioni’s Bulbo lamp: the lamp was designed for an installation at the 11th Triennale in Milan. As it was originally conceived, connecting one lamp in series to another, which drastically reduced its potential and the internal filament turned a dazzling reddish colour that gave off a low-intensity, warm, ambiance light. The 2019 edition by Flos reproduces this filament in tungsten with an LED source, preserving the same warm, comfortable temperature of the light as the original. Flos has also presented innovative designs and original lighting systems created by Michael Anastassiades, Ronan and Erwan Bouroullec, Antonio Citterio, Formafantasma, Piero Lissoni, Nendo, Philippe Starck and Patricia Urquiola, to enrich its Decorative, Architectural and Outdoor lighting catalogues.

Flos' participation and support to art and cultural events


99

Goshka Macuga exhibitions

100


Flos' relationship with the

community

Besides supporting cultural events, Flos' relationship with the local territory

involves contributing to charity and fundraising events. In line with last year,

in 2019 Flos participated to the auction organized at Fondazione Prada by

donating a total of seven of its iconic products. This year’s beneficiary was

identified in Istituto Nazionale dei Tumori (National Cancer Institute) Pediatric

Oncology Department, aiming at raising funds to promote scientific studies

and medical treatments in the field of pediatric oncology. Furthermore, Flos

donated products to AIRC, the Italian Foundation for the Research on Cancer,

Fuorisalone - Milan Design Week

Apr 2019 On the occasion of Fuorisalone – Milan Design Week 2019, Flos presented a site-specific installation for the launch of the new collection of blown glass lamps Noctambule, designed by world-renowned German designer Konstantin Grcic.

"A piece of sky" Sri Lanka Pavillion

Apr 2019 The Sri Lankan Pavilion presented at XXII Triennale di Milano its own interpretation of the exhibition theme inspired by the UN Habitat program. A “Piece of Sky” offered a minimalist environment conducive to starting productive activities and settlements protected from meteorological variables. Flos designed the lighting of the Pavilion.

Pezo von Ellrichshausen studio "Echo" installation

Apr 2019 Flos was technical partner of MoscaPartners for lighting Echo, the work created by Pezo von Ellrichshausen studio which is the key feature of the collective exhibition The Litta Variations / Opus 5 during Milano Design Week. The installation was hosted in the Courtyard of Honour of Palazzo Litta, an historical mansion in the center of Milan.

Goshka Macuga exhibition May - Aug 2019 On the occasion of the 100th anniversary of the Bauhaus, Hanover’s Kestner Gesellschaft presented a solo exhibition by the Polish-British artist Goshka Macuga. In her work, Macuga questions historiography, especially key ideas of modernism such as a belief in progress, authorship, and utopia. This exhibition focused on the Bauhaus, the influential school of art, architecture, and design, and its connection to the Kestner Gesellschaft.

Anastassiades Latin America Tour

Nov 2019 Following the successful Asian-Australian tour held in 2018, Flos and designer Michael Anastassiades partnered again in a new exclusive travelling activity, this time covering key Latin American cities with a focus on Brazil and Mexico. The tour featured site-specific lighting installations and academic talks, hosted at leading local Art, Architecture and Design universities.


101

19 Fratelli dell'Uomo, which is acknowledged by the Italian Foreign Ministry, was launched in Italy in 1969 and it is part of the Frères des hommes Group.The organization supports projects and initiatives, mainly located in Latin America and Africa, concerning access to food, environmental protection and protection of common goods, responsible economy, community health, as well as migration and co-development. From 2019, Fratelli dell'Uomo no longer exists as an independent entity, but instead it has been integrated into Amref.

through the Love Design fundraising initiative to help fund the organization’s

activities. In 2019, Flos also supported an auctioned in-kind donation Il Volo

ONLUS, a cooperative that deals with young people who suffer from serious

personality disorders in a therapeutic community.

An integral part of Flos' commitment towards the community is the long-

lasting support to Fratelli dell'Uomo , a non-governmental organization

for international cooperation working for local communities in developing

countries. According to this partnership, started in 2015, 20% of the gross

sales from the Gun Collection by Philippe Starck (Bedside Gun, Lounge Gun,

and Table Gun lamps) is donated each year to Fratelli dell'Uomo19. During

the past few years, thanks to Flos' contributions, several projects have been

supported. For instance, since 2016, Flos has allocated its entire contribution

to the project "Healthy childhood in the Totonicapán Maya Kiché community

in Guatemala" carried out by the organization "Asociación CDRO", with

the purpose of reducing communicable diseases and complications arising

from common pathologies spreading among child populations. The project

involves four local communities belonging to the Santa Lucia la Reforma

Municipality (which supersedes the villages of Pamaria, Pabaquit, San

Luis Sibilia and Arroyo San Juan) with the primary focus of improving the

availability, accessibility and overall quality of childhood health services. The

project moved forward in 2019, during which more than 3,300 consultations

were carried out between clinical and home medical visits, as well as by

delivering medicines and food supplements according to the pathologies

identified. The project progress witnesses an ongoing improvement of all

the main monitored KPIs, including: access to specialized pediatric care,

immunization and malnutrition. Finally, in 2019 Flos renovated the sponsorship

for Milan’s Politecnico’s Lighting Design and LED Technology Master by way of

confirming its effort towards academic education.

102


3.2 Fostering Design Know-How

In order to further disseminate the Company’s know-how by providing the

opportunity of deeply understanding Flos' products, both in technological

and aesthetic terms, the Group offers several training programs specifically

designed to cover the needs of the different customers (e.g. agents,

distributors, lighting designers). Flos delivers a number of courses concerning

Architectural collection products, aimed at explaining their technical features

and how to install them.

Through the training program "Progettazione della luce negli interni" (Interior

light design), Flos offers furniture retailers an opportunity to understand how

to present and sell a lighting concept. Training programs are designed for

lighting retailers and focus on how to communicate the value of design and

the history of the iconicity of Flos lamps. The courses, which are carried out at

Flos' showrooms in Valencia and Milan or directly at the client's site, provide

an opportunity to collect feedback from clients on products. In addition, taking

advantage of the restructuring activities of its facilities in Bernareggio, Ares

has built its own training room mainly dedicated to its customers, lighting

designers and architects.

As a way of sharing Flos’ know-how and brand heritage with all design

professionals and clients, in 2019 a new instrument was launched with around

400 one-to-one training sessions: Flos Light Academy. The Academy – that

will go progressively on-line in 2020 – is a storytelling internal platform that

supports all activities around sales moments with the main goal of improving

and strengthening the connection between Flos and its clients. Targeting

the sales force together with retailers, professionals and key accounts, Flos

will invest in training prior to the inauguration of new products, engage with

buyers, support all information and key specifics concerning products and

applications, as well as fostering the spread of lighting design culture and

Flos’ breakthrough products. The topics addressed through the platform vary

depending both on the client target and on the intended applications: it is a

way of meeting clients’ needs by fostering the Group’s know-how not only in

terms of product specifics but also as a way of valorizing the product history

and heritage.


103

20 Total number of patents filed by Flos S.p.A., Antares and Ares during the last three years, including the first filing phase only and excluding following extensions.

Total Number Of Patents Filed By Year20

2018 13

2017 86

2019 61

AresFlos

19 3

10 19

9 35

Antares

In order to face the global and competitive environment in which the Company

operates, in the past few years Flos (for the Decorative collection), Antares

(for the Architectural collection) and Ares (for the Outdoor collection) have

filed several patents in order to protect brands and innovations. For each new

product category Flos evaluates the best approach and solutions to protect

its creations across geographies. Among others, design registrations, patent

applications for invention or utility models and registered copyrights are some

of the methods currently applied. All patents are filed before the presentation

of new prototypes during international exhibitions. Given the nature of Flos'

core business, the majority of patents belong to the design registration

category, while the smallest share is represented by patent applications for

inventions.

The latter mainly refer to the architectural and soft architectural business and,

in an attempt to provide a broader protection of rights, take into account the

original design, but also any significant aesthetic variation that the product

may undergo in the future. Concerning the Decorative collection, patents are

first filed in Italy and then extended to the European Union and to other foreign

countries that represent strategic regions in terms of business and sales

volumes. Conversely, with regard to the architectural collection, patents are

filed directly at EU level. Since 2017, Flos has extended its brand protection

activities to the Outdoor collection as well. The wavy trend of filings during

the years is mainly due to the biennial periodicity of Euroluce, which is where

104


new lamps belonging to the Decorative collection are presented to the public.

Consequently, 2017 and 2019 record a natural, higher number of patents

filed with respect to 2018. Moreover, due to the fact that Flos’ products are

innovative both from materials and design viewpoints, additional challenges

arise when approaching the topic of protecting the Group’s ideas: this is the

case, for instance with Michael Anastassiades’ Coordinates, a modular lighting

solution launched during 2019 Milan Salone del Mobile that required more

than 40 different patents to cover not only the single piece, but also the main

possible product combinations.

Design registrations have a limited duration: in Italy, for example, they last 25

years only. Therefore, in order to guarantee, safeguard and protect some of the

Group’s iconic products, Flos also filed applications for copyright registration

in Italy and in other strategic countries. Moreover, Flos actively combats online

infringements and frauds, such as the sale of counterfeit products or the illicit

use of images and texts from Flos' website and social media. This latter kind

of violation is among the most widespread, due to the rapid growth of online

shopping. Since 2017, an external specialiszed company has supported Flos

in the continuous process of identification and suppression of worldwide

e-commerce platforms, marketplaces and social networks selling counterfeit

products. To strengthen its fight against counterfeiting – carried out with

the essential support of retailers – during 2019 Flos continued to register

its most iconic products' trademarks in several countries. With the aim of

enhancing the concept of "Made in Italy" and preserving high quality branded

products from counterfeiting, Flos is also an active member of INDICAM. It

represents nearly 180 companies, industry associations, legal and IP firms,

security consultants and other organizations committed to the stand against

counterfeiting activities affecting branded products.


105

Flos webinars

106


Reporting Principles And Criteria

Report ing Pr inciples And Cri ter ia

107

The 2019 Sustainability Report, in line with Flos’ established practice, has

been prepared in accordance with the GRI Standards: Core option. The

contents of this report reflect the materiality analysis as carried out according

to the approach described in the following paragraph "Materiality analysis",

in accordance with the GRI Standards. As a signatory to the United Nations

Global Compact (UNGC) initiative since 2015, through the present report Flos

is also fulfilling its commitment to producing an annual Communication on

Progress – a public disclosure outlining its progress in implementing the Ten

Principles of the UNGC. The UNGC Principles are clearly mapped against the

GRI indicators in the GRI Content Index. At present, Flos' 2019 Sustainability

Report does not directly address the UNGC issues and principles related

to Human Rights, since the majority of the Group's direct activities and

suppliers are located in Europe, where Human Rights are regulated by laws.

To avoid any possible risk of complicity and as proof of its commitment, Flos

introduced clauses on labor conditions and on the respect for human rights

in its contracts. In addition, some of the most important human rights issues

related to Flos' activity, such as the protection of workers' occupational health

and safety, are already included among the "Labor" principles and issues the

Group reports on.

As part of the process for defining the Sustainability Report contents, the

materiality analysis has been updated for the current reporting year in order

to map relevant topics, which reflect Flos' economic, environmental and

social impacts and/or may influence the decisions of the key stakeholders

This document includes a description of initiatives and activities carried

out during the 2019 calendar year as well as the related key performance

indicators, presented for the entire 2017-2019 period, where available. The

data collection process and the report publication activities are structured on

an annual basis. The information included in the Sustainability Report refers to

Flos S.p.A. and the fully controlled operating subsidiaries Antares Iluminacion

S.A.U. and Ares S.r.l. All commercial branches and the other operating

subsidiaries as of December, 31st 2019 are not included. Any exceptions to

this reporting scope are explicitly indicated in the text. Flos S.p.A. has its

registered headquarters in:

• Bovezzo (Brescia - Italy), Via Angelo Faini, 2;

• Antares Illuminacion S.A.U, Carrer Mallorca, Polígono Industrial Reva,

Calle Turia, Ribarroja de Turia (Valencia - Spain);

• Ares S.r.l., V.le dell'Artigianato, 24 (Bernareggio, Italy).

Materiality analysis

Scope of Reporting

108


identified. In line with the materiality review practice, a meeting with Flos’ top

management was carried out with the aim of evaluating possible changes and

updates in terms of topics' relevance and priority.

This has been carried out considering different sources of information:

• The GRI Sustainability Reporting Standards;

• The ten principles of the UN Global Compact to which Flos adheres;

• Actual or potential requests coming from clients;

• Results of a sector specific media analysis that covered news regarding Flos;

• The Regulatory framework;

• Reports from industry associations;

• Flos' ESGs targets and priorities.

The 2019 materiality analysis has undergone a rationalization process that

allowed to better align the topics with Flos’ Sustainability Policy and its

pillars. In this regard, and in line with the whole Sustainability Report, the

new materiality matrix is the expression of this new pathway that aims at

reconciling the Group’s actions with its commitments in order to deliver

the highest results. Besides this fundamental change of approach, which is

mirrored by the clustering of Flos’ material topics according to the Policy’s

three pillars, the following highlights the main results obtained through the

analysis update:

• “Growth in foreign markets” and “Product portfolio extension” have been

removed from the material topics as they are related to the business-

running side rather than to the sustainability sphere.

• While “Supply chain management” has been joined by human rights issues

and has become “Supply chain management & human rights” as a way of

deepening Flos’ commitment towards its chain of value and the correlated

socio-economic impacts, “Building energy efficiency” and “Diffusion of

energy saving culture” now falls under “Sustainability of lighting systems”.

Moreover, “Internet of things” and “Research and development” merged

into “Product innovation”.

• The “Emissions” topic has been relabeled “Emissions and climate change”

to broaden its scope and better reflect the importance Flos’ stakeholders

and the wider community attribute to it: as a result, the increasing

centrality of climate change-related issues is reflected by the topic’s

substantial upward move.

• The “Training to clients” topic, which was considered as non-material, has

become material in this year’s update. Consequently, it is reported in the

2019 Sustainability Report as required by the GRI Standards.


109

Data Privacy And Protection

Waste

CommunityRelations

ResponsibleCommunication

Water Consumption

Anti-Corruption

Diversity

Training to clients

Logistics

CompetitiveBehaviour Employees Care

Occupational Health And Safety

BrandProtection

SustainabilityOf Materials

Emissions and climate change

CorporateIdentity

Product Innovation

ProductQuality And Compliance

CustomerSatisfaction

Sustainability OfLighting Systems

EconomicPerformance

Supply Chain Management

and human rights

Re

leva

nc

e T

o F

los'

Sta

keh

old

ers

Relevance To Flos Group

110


Flos' Material Topics GRI Material Aspects Aspect Boundary Limitations Of Reporting On Boundary

Within The Organization

Outside The Organization

Within The Organization

Outside The Organization

Brand Protection - Group - - -

Competitive Behavior Anti-competitive behavior Group - - -

Corporate Identity - Group - - -

Customer Satisfaction Marketing and labeling Group - - -

Diversity Diversity and equal opportunities

Group - - -

Economic Performance Economic performance Group - - -

Emissions and climate change

Emissions Group Suppliers - Reporting scope partially extended to suppliers

Employee Care Employment Group - - -

Training and education Group - - -

Logistics Emissions Group Suppliers - Reporting scope partially extended to suppliers

Energy Group Suppliers - Reporting scope partially extended to suppliers

Occupational Health And Safety

Occupational health and safety

Group Suppliers - Reporting scope partially extended to suppliers

Product Innovation - Group - - -

Product Quality And Compliance

Customer health and safety

Group - - -

Marketing and labeling Group - - -

Supply Chain Management and Human Rights

Procurement practices Group - - -

Supplier environmental assessment

Group - - -

Supplier social assessment Group - - -

The following table provides the link between Flos' material issues and the

corresponding GRI Standards topics (Topic-specific Disclosures), together

with their scope and any eventual limitations on the reporting boundary, due

to the unavailability of data and information on the external perimeter. In the

coming years, Flos is committed to identifying and implementing specific

actions aimed at gradually extending the scope of data collection and

reporting for material aspects.


111

The following table reports an overview of Flos' key stakeholders, based on

their influence and on the dependence on the Company; for each stakeholder

category, a description of existing engagement activities is provided.

Key Stakeholders

Category Engagement tools and activities

Employees and trade unions Continuous dialogue between HR department and employees/trade unions, specific initiatives

Board of Directors Formal meetings

Suppliers Continuous dialogue and periodic meetings

Clients Website, fairs, catalogues

Training course organised for clients

Preliminary analysis of customer satisfaction on a sample of clients

End-users Social networks, communication campaigns, fairs and meetings

Competitors -

Media Press releases

Architects and interior designers Continuous cooperation on research and development of new products

Providers of financial capital Formal meetings and periodic management reports

Regulatory and certification bodies

Membership of working groups within regulatory bodies and industry associations (e.g.Assoluce, Lighting Europe, etc.)

Flos' Sustainability Report is drafted in accordance with the principles

of balance, comparability, accuracy, timeliness, clarity and reliability,

as defined by the GRI Standards. The document highlights both strengths

and weaknesses, as well as possible areas of improvements for the Group.

The data collection and reporting processes are structured in a way to ensure

information comparability over the years and to guarantee an accurate

interpretation by the key stakeholders interested in Flos' performance

evolution. Flos' 2019 Sustainability Report is not subject to external assurance.

Quality Reporting Principles

Sustainability Of Lighting Systems

Energy Group Suppliers, clients

- Reporting scope not extended to suppliers

Sustainability Of Materials Materials Group Suppliers - Reporting scope not extended to suppliers

Training To Clients Training and education Group Clients - -

112


Greenhouse gases emissions calculations have been carried out based

on the principles included in the GHG Protocol Corporate Accounting

and Reporting Standard.

Emissions have been calculated as follows:

Calculation Methodologies The methodologies and assumptions used to calculate the performance

indicators included in the Report are described below:

• Research & Development costs are calculated taking into account

capital expenses and operating costs (e.g. personnel involved, costs

for materials, etc.).

• All data related to injuries refer to the Group employees, thus excluding

contractors. Commuting injuries and first-aid cases are not included.

• Where environmental data are not available, conservative estimations

have been used, resulting in the underestimation of the Group's

environmental performance;

• Energy consumption from the Group's fleet has been calculated starting

from the following available data:

a) Flos' car fleet: kilometers covered;

b) Ares and Antares' fleet: fuel consumption.

Concerning the Scope 2 emissions resulting from the consumption

of electricity purchased from the national grid, two calculation methodologies

have been implemented: the location-based and the market-based

approaches. The first one reflects the average emission intensity of grids

taking into account both renewable and non-renewable productions, while

the second one reflects emissions from the electricity source that the company

has purposefully chosen through, for instance, contractual instruments.

The following table shows the conversion factors that have been used:

Average fuel consumption car [l fuel/100km]

UK Department for Transport, Fuel Consumption 2017

Fuel density [l/t] UK Department of Environment, Food & Rural Affairs (DEFRA), Conversion factors - Full set, 2017, 2018, 2019

LCV (Lower Calorific Value) [GJ/t] Italian Ministry for Environment, Tabella parametri standard nazionali, 2017, 2018, 2019


113

GHG Emissions Scope 1

Source Activity Data Emission Factor GWP

Flos' Car Fleet Kilometers covered UK Department of Environment, Food & Rural Affairs (DEFRA), Conversion factors - Full set, 2017, 2018, 2019

CO2 equivalent, considering the following gases: CO2 (GWP = 1), CH4 (GWP = 25) and N2O (GWP = 298). Global Warming Potentials (GWPs) are taken from IPCC Fourth Assessment Report (AR4).

Ares And Antares' Fleet Fuel consumption (gasoline and diesel)

UK Department of Environment, Food & Rural Affairs (DEFRA), Conversion factors - Full set, 2017, 2018, 2019


Leakages From Air-Conditioning Systems Of Refrigerant Gases

Leakages (kg) - Global Warming Potentials (GWPs) are taken from IPCC Fifth Assessment Report (AR5).



Electricity Purchased From The National Grid (Location-based Approach)

Electricity consumption

Terna international comparisons on Enerdata figures – 2016, 2017, 2018

Only CO2 emissions have been considered

District-Heating Purchased From The Waste To Energy Plant

Heat consumption UK Department of Environment, Food & Rural Affairs (DEFRA), Conversion factors - Full set, 2017, 2018, 2019


Electricity Purchased From The National Grid (Market-based Approach)

Electricity consumption

AIB, European Residual Mixes 2016, 2017, 2018




-Business travels by plane;

-Logistics

Kilometers UK Department of Environment, Food & Rural Affairs (DEFRA), Conversion factors - Full set, 2017, 2018, 2019


Business travels by train Kilometers Ferrovie dello Stato, "Rapporto di Sostenibilità ", 2016, 2017, 2018.


114


GRI Content Index

GRI Content Index

115

GRI Standard Disclosure Page number(s)

GRI 101: Foundation 2016

General Disclosures

GRI 102: General Disclosures 2016

Organizational Profile

102-1 Name of the organization 107

102-2 Activities, brands, products, and services 32-39

102-3 Location of headquarters 107

102-4 Location of operations 107

102-5 Ownership and legal form 26-31

102-6 Markets served 32

102-7 Scale of the organization 26-32; 84-85

102-8 Information on employees and other workers UNGC 84-85

102-9 Supply chain 49-51

102-10 Significant changes to the organization and its supply chain 107

102-11 Precautionary Principle or approach *

102-12 External initiatives 58-59; 107

102-13 Membership of associations 63-64

Strategy

102-14 Statement from senior decision-maker UNGC 7

Ethics And Integrity

102-16 Values, principles, standards, and norms of behavior 26-31

Governance

102-18 Governance structure 26-31

Stakeholder Engagement

102-40 List of stakeholder groups 111

102-41 Collective bargaining agreements UNGC 86

102-42 Identifying and selecting stakeholders 111

102-43 Approach to stakeholder engagement 111; 96-104

102-44 Key topics and concerns raised 111; 62-65; 96-104

Reporting Practice

102-45 Entities included in the consolidated financial statements 29

102-46 Defining report content and topic Boundaries 107-111

102-47 List of material topics 107-111

102-48 Restatements of information 73; 111-112

102-49 Changes in reporting 107-113

102-50 Reporting period 107

102-51 Date of most recent report 107

102-52 Reporting cycle 107

102-53 Contact point for questions regarding the report 109

102-54 Claims of reporting in accordance with the GRI Standards 107

102-55 GRI content index 115-119

102-56 External assurance 111

* Flos adapts its decision-making approach by taking into account the social and environmental issues according to the precautionary approach.

116



Material Topics

GRI 200 Economic Standard Series

Economic Performance

GRI 103: Management Approach 2016

103-1 Explanation of the material topic and its Boundary 28; 107-111

103-2 The management approach and its components 28; 107-111

103-3 Evaluation of the management approach 28; 107-111

GRI 201: Economic Performance 2016

201-1 Direct economic value generated and distributed 28

Procurement Practices


103-1 Explanation of the material topic and its Boundary 49-51; 107-111

103-2 The management approach and its components 49-51

103-3 Evaluation of the management approach 49-51

GRI 204: Procurement Practices 2016

204-1 Proportion of spending on local suppliers 49-51

Anti-corruption UNGC





GRI 205: Anti-corruption 2016

205-3 Confirmed incidents of corruption and actions taken 30-31

Anti-competitive Behavior





GRI 206: Anti- competitive Behavior 2016

206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly practices

30-31

GRI Content Index

117

'**No suppliers were assessed for environmental impacts. In 2017, Flos analyzed the potential negative impacts in its supply chain and new contractual clauses including environmental aspects are currently under implementation


Material Topics

GRI 300 Environmental Standards Series

Materials UNGC





GRI 301: Materials 2016 301-1 Materials used by weight or volume 72-75

Energy UNGC





GRI 302: Energy 2016 302-1 Energy consumption within the organization 77-78

Emissions UNGC





GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions 80

305-2 Energy indirect (Scope 2) GHG emissions 80

305-3 Other indirect (Scope 3) GHG emissions 80

Supplier Environmental Assessment UNGC





GRI 308: Supplier Environmental Assessment 2016

308-2 Negative environmental impacts in the supply chain and actions taken**

(**)

118



Material Topics

GRI 400 Social Standards Series

Employment UNGC





GRI 401: Employment 2016 401-1 New employee hires and employee turnover 86

Occupational Health And Safety UNGC


103-1 Explanation of the material topic and its Boundary 91-93; 107-111;




403-1 Occupational Health and safety management system 91-93

403-2 Hazard identification, risk assessment, and incident investigation

91-93

403-3 Occupational health services 91-93

403-4 Worker participation, consultation, and communication on occupational health and safety

91-93

403-5 Worker training on occupational health and safety 92

403-6 Promotion of worker health 91-93

403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships

91-93

GRI 403: Occupational Health And Safety 2018

403-9 Work-related injuries 92

Training And Education UNGC


103-1 Explanation of the material topic and its Boundary 87-89; 102; 107-111

103-2 The management approach and its components 87-89; 102

103-3 Evaluation of the management approach 87-89; 102

GRI 404: Training And Education 2016

404-1 Average hours of training per year per employee 89

Diversity And Equal Opportunity UNGC





GRI 405: Diversity And Equal Opportunity 2016

405-1 Diversity of governance bodies and employees 85

Supplier Social Assessment UNGC





GRI 414: Supplier Social Assessment 2016

414-2 Negative social impacts in the supply chain and actions taken ***

'***No suppliers were assessed for environmental impacts. In 2017, Flos analyzed the potential negative impacts in its supply chain and new contractual clauses including environmental aspects are currently under implementation

GRI Content Index

119


Material Topics

GRI 400 Social Standards Series

Customer Health And Safety


103-1 Explanation of the material topic and its Boundary 42-49; 62-68; 107-111

103-2 The management approach and its components 47-49; 62-68

103-3 Evaluation of the management approach 47-49; 62-68

GRI 416: Customer Health And Safety 2016

416-2 Incidents of non-compliance concerning the health and safety impacts of products and services

49

Marketing And Labeling





GRI 417: Marketing And Labeling 2016

417-1 Requirements for product and service information and labeling 62-68

Brand Protection





Product innovation





Corporate Identity





For further information about this Sustainability report please contact

Flos S.p.A., Via Angelo Faini, 2 – 25073 Bovezzo (Brescia), Italy

Tel: + 39 03024381 – Email: [email protected]

120


Design Flos S.p.a

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